It happens every year...we have to do our taxes. Even for those of us in the financial services industry, it's a real pain. It's tedious, time-consuming and in some manner or another, there's usually a cost involved - thanks, but no thanks. Though, unless you want the IRS on your back, you gotta get it done. Read below for a few tips to help you get through tax-season relatively unscathed. Okay we're lying, it's going to suck, but the end goal is to minimize how much you have to pay and hopefully maximize your refund. And that's something...
MAKE A LIST, CHECK IT TWICE
First, take a little time to get organized. Handing your tax pro a box full of receipts is a surefire way to get a much smaller refund. Afterall, you're paying by the hour and no one wants to sort through a stack of your receipts from work drinks at BDubs (yes, in certain cases you can deduct the cost of your beer and wing consumption - great country, America!). Take the time to provide an itemized/categorized written summary. Also if you use Turbo Tax, being organized will save you a TON of time inputting the data. We all have more exciting things to be doing than spending the afternoon working on our taxes. Below are a few other ways to increase your STASH and get the biggest refund possible
A Hidden INVESTING tax benefit
It's harvest season! If you have an investment account, this is a good time of year to take a look at how your portfolio is doing. If you own any investments that may have lost money significantly, consider selling them. There's a hidden tax benefit in doing so. You can deduct up to $3,000 in investment losses from your taxable income this year and then carry forward any additional losses in future years. It's also a great way to offset paying taxes on any positions you may have sold for a profit! So that means if you lost $1,000 on Investment X but made a $1,000 in Investment Y, you can file so that you pay $0 on the profit. In the financial world it's called, Tax Loss Harvesting.
GIVE AND YOU SHALL RECEIVE
Literally. Charitable donations are tax-deductible. Often times, smaller donations are overlooked because you didn't record them anywhere. These definitely add up. Did you donate any clothing, sponsor your friend walking for a cause, give $$$ to a colleague raising money for a foundation? All of these donations can be deducted from your taxable income, reducing your total taxes due.
PAY YOUR FUTURE SELF + BENEFIT NOW
One day, you'll stop working and you will live on your savings - for most of us, that day can't come soon enough. In order to encourage us to save towards this mythical future in which we don't have to set an alarm clock on Monday-Friday, there's a potential tax break on making contributions/savings to those accounts today. You are right, there are no particularly obvious short-term benefits to this EXCEPT that any contributions you make to a Traditional IRA (in certain cases) or a 401(k) (always) can be used to lower your taxable income - meaning you pay less taxes today. There are specific rules that dictate if your IRA contributions are tax-deductible, such as if your employer offers you a qualified plan or not, so check here for more details.
Read our article, Tax Tips: Credits + Deductions for more ways to save on your taxes!