Year-End Tax Planning

The end of the year is fast approaching so it’s a great time to take a look at your income tax situation and make any last-minute adjustments needed. I recommend preparing your tax return with full-year projected info and see what your liability is today. This will allow you to determine if you are going to owe a balance, get a refund, or about be even based on your deposits/withholding to-date.

If you realize you are going to owe then you may want to consider end-of-year giving or a contribution to a traditional IRA/401k/etc. Take a look at what changed comparing your current year return to last year’s return. That may ignite some ideas of practical things you can do to plan accordingly.

I do not recommend spending money just to get a tax break but if you were going to spend the money anyway then there may be a benefit to just front-loading the cash outflow now. You should reach out to your tax adviser now to get a handle on how things are looking before you get a surprise. Especially given the dynamic tax environment we are in currently and recent changes to the federal tax withholding tables used by employers to calculate employee withholding.

Also, be aware of any state specific tax advantages you may be overlooking. Perhaps look over the full state tax form and see if there are deductions/credits you could be taking advantage of but you aren’t for whatever reason. For example, depending on the state, you could strategically time contributions to a 529 plan to offset taxes in a higher income year or to offset an amount you would otherwise owe due to underpaying estimated tax deposits in a given year. Talk with your adviser and ask what you should be considering that you aren’t currently.

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