How to Save Money on Taxes Before Year-End
Tax season is almost everyone’s least favorite time of year. After all, no one likes forking over more of their hard-earned money to the IRS. However, we haven’t reached the end of the year yet, so there are still some last-minute steps you can take to reduce your taxable income. In an effort to help you line your pockets instead of Uncle Sam’s, we’ve put together some of our favorite year-end tax tricks below:
Make Contributions to Tax-Advantaged Accounts
Luckily for us, the IRS has devised a long list of tax-advantaged accounts for tax-savvy citizens. These accounts allow you to contribute pretax income, thereby reducing your taxable income by essentially shifting your money from one pocket to another. Accounts like Traditional IRAs/401(k)’s, 529 savings accounts, and HSAs exist to help tax-savvy citizens save for specific things and get a tax break while doing so.
Traditional IRAs and 401(k)’s allow you to set money aside for retirement, 529 savings accounts allow you to save for your (or your children’s) education, and HSAs help you save for medical expenses. Oftentimes, these are things you are saving for anyway, so you might as well get a tax break!
Make Some Donations During the Holiday Season
Making donations is a great way to give back to those in need, all while getting a tax break for doing so. The IRS tries to encourage philanthropy, so it allows you to deduct donations to qualified charities worth up to 60% of your adjusted gross income (AGI). This not only will help the community, but it will also help lighten your tax burden. Not to mention, you can rest easy knowing that your hard-earned money is going to a worthwhile cause that you care about!
Harvest Your Tax Losses
It’s no secret, the stock market has not treated us very nicely this year! If you have a brokerage account, you may want to consider selling some of your losing positions and harvesting a tax loss. Doing some tax loss harvesting will help you offset any gains you may have, and if you don’t have any gains, you can still write off up to $3,000/year in tax losses against ordinary income. Don’t worry, if you have more than $3,000 in losses, you can carry them forward into the next year! This means you can take advantage of a downturn in the stock market and potentially carry forward your losses for years into the future.
Reach Out to Urban Wealth Management
There are countless loopholes and quirks in the US tax code, so it’s important to have financial advisors that are well-informed and knowledgeable. The expert team of advisors at Urban Wealth Management have collective decades of experience in finance, so they can help you navigate the often-confusing tax code.