Plenty to Gain with Tax Planning

Consider conducting a tax planning exercise now to see if you can take actions to minimize your taxes. Here are some ideas to get you started.

Assess your income. Begin by determining how your income this year will compare to last year’s income. Then apply any tax implications this income change may cause. If your income is rising, you may be moving into the next higher tax bracket. Your income could also trigger a phase-out that will prevent you from taking advantage of a deduction or tax credit formerly available to you.

Changes in deductions. Examine if there will be changes in your itemized deductions this year. Typically this happens when there is a change in your life. Here are some examples;

Arrow Purchasing or selling a new home
Arrow Taking out a new mortgage
Arrow Getting married or divorced
Arrow Incurring large medical expenses
Arrow Changing jobs
Arrow Having a new baby

What tax changes impact you. Over the past few years a number of items in the tax code keep expiring, only to be extended once again late in the year. Review your past income tax return to ensure some of the expired provisions will not surprise you this year. While there is still time for Congress to make changes, you will want to plan accordingly.

Manage your retirement. One of the best ways to reduce your taxable income is to use tax beneficial retirement programs. Now is a good time to review your retirement account funding. Are you taking advantage of your employer’s retirement plans? Are you saving money to invest in your future through the various retirement savings options?

Look into credits. There are a variety of tax credits available to most taxpayers. Spend some time reviewing the most common to ensure your tax plan takes advantage of them. Here are some worth reviewing;

Arrow Child Tax Credit
Arrow Earned Income Tax Credit
Arrow Premium Health Credit
Arrow Adoption Credit
Arrow Elderly and Disabled Credit
Arrow Educational Credits (Lifetime Learning and American Opportunity Credit)

No surprises please. Conducting a tax planning review now allows you time to take advantage of tax code provisions to reduce your tax obligation. Remember some tax saving ideas may require funding on your part. It is best to identify them now so you can save cash to take advantage of them prior to the end of the year.