Each year people take time to collect the necessary documents to prepare their taxes. However, before you file your taxes, we recommend that you do some tax planning.
When you don’t set aside time for tax preparation, you’re going to lose money or end up paying the government more than necessary. Read on now for these tax planning tips, and get ready for the return you deserve.
1. Increase Your Retirement Contributions
You might be wondering why it would be beneficial to have more money taken out of your checks each week? When you have more money taken from your check and placed into your retirement fund, it reduces the amount of income you have that would be considered taxable.
This would only apply to those who can count their contributions to their retirement funds as a deduction when filing their taxes.
2. Turn Your Home Into a Smart Home
There are upwards of 175 million smart homes globally.
Every day another homeowner is finding a way to turn their home into a smart home. This can be done by using solar panels or a smart thermostat in the home.
These are just a few of the items that can turn your home into a smart home, and doing so could pay off big time when you’re doing your taxes. When you have these installations made, ensure that you keep the receipts for the services because you can use them to count towards your energy tax credit or rebate from SDGE or your local utility company.
If you’re not sure what that is, that means more deductions or a rebate credit for you and less money owed.
3. Rethink Your Withholdings
When you work someplace, you’ll have a certain amount of money withheld for both federal and state taxes. We recommend that you go back and review how much you’ve allocated to be withheld for both.
Sometimes people have too much or too little taken out and will need to adjust. While giving too much isn’t a huge deal giving too little to federal and state taxes could mean you owe more money or face certain penalties from the IRS.
We recommend checking out an IRS withholding calculator to ensure you’re withholding the correct amount.
4. Take Advantage of Tax Credits
There are several tax credits available for you to claim that you might not even know about. For example, if you’ve got children that you claim as dependents, they will count towards the children’s tax credit.
In some cases, if you owe nothing, these credits could mean more money in your pocket, but if you do owe money, it means a reduction in your final tax bill.
Tax Planning 101
When it comes to tax planning, the name of the game is figuring out how to owe the government the least amount of money by the end of the year. While that’s not always possible, you can always do things like put more into your retirement fund or claim tax credits to help reduce your bill.
If you’re looking for tax preparation help, contact Pacific Tax. We know where and how to check for money that might be hiding from you when filing your taxes.