Tax planning and preparation can be a hassle for anyone. Tax season sometimes is an exhausting time to think about, and it is a dreaded time of the year for many. However, did you know your life could be made easier by using tax planning services? We are here to tell you how. By following these six planning tips for the end of the year, you will be in the best shape for tax season, guaranteed. Plus, the end of 2022 is already upon us, don’t wait to think about this until it is too late. With some proactive planning, you can beat the rush, maximize your return, and easily get through tax season. Let’s examine what factors can make your tax planning goals simple.
1. End of the Year Tax Deductions
Maximize tax deductions by going into the year-end to know what expenses you can deduct or claim on your tax return. Planning and organizing this information now will save you time in the future and help you better prepare for filing season. You can also choose to accelerate or defer deductions once you have them organized.
2. Contribute to a Retirement Account
Retirement contributions are pre-tax. Therefore, the less taxed income, the lower your tax rate will be. The more you contribute to your retirement account, the less money is taken out in taxes on your check. Even if you cannot afford to maximize your retirement, you should still be contributing to a retirement account in order to prepare for the long run. Also, tax planning for retirement is one of the most important things you can do to set yourself up for financial success.
3. Check Your Paycheck Withholdings
Getting paid is exciting, but when your check hits your bank account, are you looking at your pay stub to ensure your withholdings are accurate? Don’t be blindsided by owing more than you think you will or getting a smaller refund when you file your taxes. You should be prepared by regularly checking your withholdings and updating your filing status when necessary. Any marital changes, married or divorced, should be updated immediately because it can impact the withholdings on your pay.
4. Passive Income and Side Hustles
Making passive income is easy, and if you get into side hustles (like investing, real estate, social media, etc.), you could put extra income into retirement, savings, or start paying debts off early. Also, you can begin building wealth through investments and side hustles. You should also include any passive income and side hustle income in your tax return.
5. Make the Most Out of Capital Gain Tax Rates
Capital gain tax rates are at a good place right now because they take inflation into account. Therefore, take advantage of them before they change and sell capital assets to make the most of both exemptions and these rates. Capital gain taxes are the money you owe based on selling capital assets or investments you own.
These rates differ based on your income, the sale price of the asset, and your filing status. Take a look at your assets and decide what you want their future to be or what is an alternative plan. Can any of them be sold right now? Is it better to hold on to some longer-term? These are all questions a financial advisor can help answer and guide you to a promising solution.
6. Review Your Estate Plan
Finally, one last major thing to review is your estate plan. Not fun in the slightest, but just like planning for retirement, this one is important, too. If you have taxable estate items, take advantage of exemptions and lifetime gifts, which will change in 2025. Now is the best time to review your estate plan and make any necessary changes. So, you only have two more years to make this one work to your advantage.
Prepare Your Taxes with Saddock Advisory
Get ahead and prepare for the 2023 tax filing season, don’t wait until it is too late. Saddock Advisory is proud to work with you to get your finances in order so that you have a more straightforward, smoother time filing your taxes with accuracy and efficiency. Consulting with our financial experts ensures effective tax planning.
Our financial advisors can help you review your portfolio to see what needs extra attention and what currently does not need any change.
If you have questions or are ready for complete tax planning services, contact us now to get started.