by
financial planning
12.5.23

7 End of Year Tax Tips to Help You Maximize Deductions

Discover essential tax-saving strategies for the year’s end, reducing your tax liability by maximizing deductions, optimizing retirement contributions, and more!

As I sat down to write this, November was crinkling like a dead leaf, and I was thinking more about the fact that I can finally drink hot chocolate in my favorite wintry jacket - something we Phoenicians only get a very slim window to enjoy - than I was about getting my financials tight and tidy.

Now it’s time to pull my head out of the reindeer’s sass to help you make the most of available tax-saving opportunities because no one enjoys paying taxes or wants an unexpected tax bill. To help you navigate this year’s tax landscape, here are seven tax tips you need to review before the end of the year.

1. REVIEW ELIGIBLE TAX DEDUCTIONS

Your first step to massive tax savings is to maximize deductions. Review any and all deductions for which you may be eligible, and hunt down any necessary documentation (hope you kept those receipts) to account for all potential deductions to reduce taxable income. Here’s a list of some common tax deductions to look out for:

  • Charitable Contributions. Donations of cash, goods, or property
  • Mortgage Interest. Interest paid on a mortgage for a primary or secondary residence
  • State + Local Taxes (SALT). State income, property, or sales tax 
  • Medical Expenses. Unreimbursed medical expenses exceeding a percentage of your adjusted gross income (AGI)
  • Educational Expenses. Tuition fees, student loan interest, and other education-related expenses
  • Home Office Expenses. Rent, utilities, or internet services.
  • Self-employed Business Expenses. Uniforms, job-search costs, tools + materials

2. MAXIMIZE RETIREMENT CONTRIBUTIONS

Not only does contributing to your retirement accounts ensure your kids don’t have to change your diapers down the line, it also offers tax benefits right now. Consider maximizing contributions to your 401k, IRA, or other retirement plans before year-end to take advantage of potential tax deductions and compound interest growth.

3. UTILIZE ENERGY-EFFICIENCY CREDITS

Green is the color of money (kinda), and if you made eligible investments into making your home energy-efficient, you’ll be seeing some beautiful emeralds in your bank account. Do it for the environment! Do it for your taxes. Go green and check for available energy-efficiency credits or rebates for installing renewable energy systems or improvements. You’ll reduce your tax liability while promoting sustainability.

4. CONTRIBUTE TO AN HSA

Health Savings Accounts (HSAs) are a triple threat when it comes to tax advantages – contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-exempt. We may not have single payer healthcare, but you can at least maximize your HSA contributions and reap the tax benefits, as well as save for future healthcare costs.

5. REVIEW YOUR FSA

Flexible Spending Accounts (FSAs) allow you to set aside pre-tax dollars for eligible medical or dependent care expenses. FSAs are “use-it-or-lose-it”, so it’s crucial to review your account balance and plan your eligible expenses before year-end to avoid forfeiting any unused funds. Unless you want to straight up lose your own money. Your healthcare, your choice. 

6. TAKE ADVANTAGE OF TAX-LOSS HARVESTING

This one is all about strategy, and if you haven’t dealt with it before - honestly, even if you have - it would be best to consult with a financial advisor to ensure this tax strategy aligns with your overall financial goals. Consider evaluating your investment portfolio for tax-loss harvesting opportunities. Selling investments at a loss can offset capital gains and up to $3,000 of ordinary income, reducing your overall tax burden.

7. SEEK GUIDANCE

When in doubt, seek professional help. No, your parents and besties don’t count unless they are a legitimate tax advisor or financial planner. Tax laws and regulations are complex and subject to change.

Have you not learned anything from all the high-profile, celebrity tax trouble tales? Granted, those might be more about tax evasion, but the point is that you don’t want to mess around and find out that the IRS is after you. Consulting with an expert can help you navigate tax intricacies, maximize your deductions, and optimize your tax strategy.

If you get FOMO every year from your friends bragging about their tax return, take these proactive steps before the end of the year to significantly impact your tax situation and financial well-being. No child tax credit necessary! By reviewing deductions, maximizing contributions, leveraging tax credits, and seeking professional guidance, you can position yourself for a more tax-efficient and financially secure future.

Get more tax tips when you access free resources at MoneyEdu. Just sign in, click on “Library”, and filter by topic “Taxes”. To register for free, use program code SWBLOG21.

December 5, 2023

Published by SunWest Credit Union

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