The Year End Tax Planning and analysis of the financial elements in the perspective of upcoming taxes for the following year are termed as Year-End Tax Planning. At JDK Accounting, we solve Tax, Accounting, Bookkeeping, Accounts Paybles & Receivable and various business issues with utmost honesty and integrity. With the help of our tax experts and specialist, we assist you in answering all of your tax issues and helping you in Year End Tax Planning.
Acting before 31st December:
It is always good to act before the year-end to save unnecessary taxes. Predicting the upcoming taxes and proper Tax planning will alert you about any surprise taxes and will shed many obligations.
Put off/Defer Income:
Income is taxed in the year in which they are received. If it is possible, you can defer your income/salary and delay bills to save some taxes. Taking capital gain in 2020 instead of in 2019, one can defer their income. But it only works when your income next year will be under the lower bracket.
Accelerating deductions can reduce taxes in the running year. Charity is a great way to get a deduction. You should have the receipt to back up any contribution you have made. Deduction is an essential pillar of proper tax planning.
Itemize if possible:
According to IRS, around 75% of taxpayers take the standard deduction, but they can reduce taxes if they can itemize. The new regulations increased the deduction of $24,000 for married couples and $12,000 for single filers. Itemizing may make Tax Preparation simpler.
Aware of Alternative Minimum Tax (AMT):
These taxes are basically for upper-income ranges. These taxes are figured separately from primary tax liabilities and compared after that whichever fee is higher; it has to be paid.
Sell Stocks to counter Capital Gains:
Selling stocks, mutual funds that are in loss will increase the capital loss, which will balance out capital gains.
Contributing to Retirement Account:
Tax-deferred retirement accounts are one of the best investment approaches. This will lower your gross income. Increase contribution to (401k) maximum allowed money is $19,000 and $25,000 for people who are 50 or above.
Avoiding Kiddie Tax:
Shifting to kid’s lower tax bracket for tax benefits is not recommended. It was made to stop families from changing from parent’s high tax bracket to children’s low tax bracket.
Funding a 529 education Saving Plan:
You can provide a tax-free gift to any beneficiary by putting money into this plan ($15,000 from a single parent).
While there are a lot more methods to do year End tax planning and lower the tax obligations you owe, the one thing that remains continuous whatever type of taxpayer you are is that you require to intend ahead. As soon as the tax year has already finished, you have actually lost essentially any kind of flexibility available to you to manage your tax liability.