10 tax moves to make before Summer begins
Take advantage of warm weather to make tax moves!
While its more enjoyable to travel, go on adventures or relax during Summer, it is also a good time to plan for your future and revisit your finances on the slower days of summer.
Revisit your retirement accounts
Make your savings work harder for you, this Forbes article explains that “the more money that you can sock away into your 401(k) or other retirement savings plan, the better, since most contributions are made with pre-tax money. That goes for self-employed persons, too.”
Take advantage of your days by the pool to assess if you’re contributing enough and dive into what your long-term plan looks like.
Think about your healthcare accounts
If you have a Flexible Savings Account (FSA) making sure that you’re contributing an amount commensurate with your annual healthcare spend and using your funds before you lose them is important.
On the other hand, if you have a healthcare savings account (HSA), you can contribute pre-tax dollars directly from your paycheck – even without an employer contribution. Just keep in mind that with an HSA you must have a high deductible medical plan to contribute, and your funds won’t expire until you use them all.
Check your withholdings
During Summer you should check the number of deductions you take on your paycheck, because if you take too many you may have taxes to pay at the end of the year. According to Forbes, “the Internal Revenue Service (IRS) encourages you to do a quick check up on your taxes. By plugging your current tax data into the withholding calculator on the IRS website, you can do a “paycheck checkup” and avoid any nasty surprises at year end.”
Prepare taxes for your side business
If you have recently started a side business in addition to your full-time job, you know what it’s like putting in extra hours; don’t forget to spend extra time on you taxes as well. If you find some additional time this Summer, whether you have an LLC, a partnership or gig income, remember that if you are not paying estimated taxes and are earning extra income, you will have to make up for that at the end of the year. However, if you are losing money, then that will be helpful in reducing your tax load.
Pay your estimated tax
Being surprised during tax season and having to pay money you weren’t prepared for can be hard. Luckily, you can pay quarterly estimated taxes. According to the IRS, “Taxpayers must generally pay at least 90 percent of their taxes throughout the year through withholding, estimated tax payments or a combination of the two. If they don’t, they may owe an estimated tax penalty.”
Has your household size changed?
If the answer is yes, then you should look at your pre-tax withholding. “This past April, the IRS said that the average federal tax refund was $2,864 – the rough equivalent of a month’s salary for many people. Adjusting the withholding on your W-4 may bring you more take-home pay. Ideally, you would adjust it so that you end up owing no tax and receiving no refund,” this site explains.
Pay tuition bills
If you, your kids or your spouse are getting higher education, there are ways to get reimbursement for tuition and other associated costs, like textbooks. Click here for more on education tax breaks, like the American Opportunity Credit.
Go to the doctor
TurboTax explains that “The Internal Revenue Service allows taxpayers some relief, making some medical expenses partly tax-deductible. To take advantage of this tax deduction, you need to know what counts as a medical expense and how to claim the deduction.”
Consider home improvements
Did you know that many states offer tax breaks on some home improvements? If you’re a homeowner, this is a great time to get that solar panel you’ve been thinking about and explore how this can benefit you financially as well!
Find the right tax professional for you
If you haven’t already, now’s the time to start looking for the right tax professional that will assist with tax preparations when the season comes. Before deciding on someone, make sure to ask questions about their experience, references and fees.