The holiday season keeps you busy with home decor, party planning, and festive preparations. Tax planning is likely the last thing on your mind as you are engaged in the fun and festivities with friends and family. But experts recommend utilizing the post-Christmas days to have a good look at your income and expenses. It may seem too early because the deadline is in April, but planning sooner than later gives you a head start. Moreover, nothing gets better than being stress-free a few months before the deadline. You may also gain valuable insights on cost-saving strategies from seasoned experts and fellow taxpayers. Here are a few to cut your bill and have a happy tax season when it arrives.
Look for ways to optimize deductions
The festive season gives you an opportunity to optimize tax deductions through donations. Think beyond the joy of giving because donation requests from charities are worthwhile from a tax-saving perspective. You can leverage them to claim valid deductions, but remember to get a receipt to validate it. Giving an appreciated asset such as shares of stock is a good option as it provides a double benefit. Firstly, you get a deduction for the total value of the gift. Secondly, you can also use it to ditch capital gains taxes to lower your bill. Businesses also have the chance to optimize their deductions with strategies like loading expenses into profitable years and buying long-term assets.
Plan for complex situations beforehand
You may foresee a complex tax situation that may get you in big trouble down the line. Such circumstances require extensive research about alternative tax strategies. You may also have to make some critical decisions at this stage. For example, selling a home or business may have daunting tax implications as you make high-value transactions. It is better to check the best providers for tax planning services during the holidays when you have some free time at your disposal. You may even plan a meeting at a convenient time to provide details on your situation. The sooner an expert gets on the project, the more options they may have for you to provide a resolution. Getting them on board early also enables you to stay ahead of the tax filing crush.
Get smart with investments
Think long-term this holiday season with investment planning. In fact, you can utilize long-term investments to prepare for the upcoming tax season and lower your liability. For example, you may get a full or partial deduction on your IRA contribution according to your filing status and income. Consider opening an IRA and making a last-minute contribution to it as you can claim a deduction from your taxable income. The best thing about the step is that the investment grows over time and gets you valid deductions. Another recommendation is to find investment opportunities to harvest loss.
Tax planning may not be on your holiday checklist this season, but working on it can put you in a vantage position. Follow these simple strategies to cut your bills and stay ahead of complications.