As the year winds to an end, it is important to re-evaluate your financial and personal situation to determine if you need to make adjustments before tax time. The last few months are your chance to make changes that could net you a bigger tax refund or a smaller tax bill. To ensure you are on the right path with your finances, here are some end-of-the-year tips to keep in mind.
Look for Tax Deductions
The end of the year is your last chance to look for and take advantage of deductions and have them count on your next year's taxes. It might be too late for some deductions, but you still have a chance with others.
For instance, now is the time to make any charitable donations that you were planning to for the holidays. When you make your donations, make sure your information is properly documented on the receipts so that you can get credit on your taxes.
Another way to score a tax deduction is to fund your retirement plan. Your contributions to a traditional individual retirement account, or IRA, are deductible if you have not regularly contributed to it. However, if you have been regularly contributing, there is still a possibility that you can get a deduction for making contributions. Whether or not you can depends on your adjusted gross income. Talk to your accountant to determine if you could qualify for an additional deduction.
If you and your partner were thinking of tying the knot, doing so on or before December 31st might be the smartest tax move you make. Even if you marry on the last day of the year, in the eyes of the Internal Revenue Service, or IRS, you have been married all year. There are several huge tax benefits to filing married.
One of the main benefits of filing under the married status is that once you and your spouse are married, your charitable deductions allowed are increased. Without the increased limit, you might be forced to carry over the deductions to the next filing year. Marriage means that you get the full benefit of your deduction now.
Marriage is also a way of protecting your estate from taxes. If something happens to either of you, and the living spouse inherits a large share of the estate, estate tax is usually not applied to that share of the inheritance.
Work with your accountant to find other changes you can make to ensure you are in a good position for tax time.
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