As we enter the New Year, it’s time to think about filing our income tax returns. There are many things we can do to improve our situations for this filing year and for years to come. Here are a few of the most important ones to remember:
Donate, Donate, Donate!
There are plenty of charitable organizations, like Goodwill, that accept non-cash donations and are deductible. This is a simple money-making tool that many of us forget and, instead, put on the curb of our home to be picked up. The items you donate must be in decent condition and you should receive a receipt from the accepting organization in the event that you’re audited. So begin your spring cleaning a little earlier than planned and get that tax break!
Give, Give, Give!
You can be generous with your money without any negative tax ramifications, up to a certain limit. In 2016, you could give up to $14,000 (in the form of cash, gifts, or real estate) without filing a gift tax return. Most importantly, if you are the receiver of the gift, the tax burden is the responsibility of the giver, regardless of size. Different rules apply for foreign gifts.
Save, Save, Save!
If you’re still in the workforce (or simply have any earned income), the easiest and simplest way to defer taxes is to contribute as much as you comfortably can to a retirement plan
. If your employer offers a deferred plan such as a 401(k) or 403(b), you will receive pre-tax savings and will decrease the amount of earned income reported to the IRS. In some cases, you’ll also receive the added benefit of a matched contribution from your employer if available. The growth on your money is tax-free and you will pay your fair share of taxes upon withdrawal in retirement, which lessens your tax bill now.
If you are unable to participate in your employer’s plan, or they don’t offer one, you can create your own retirement plan in the form of an individual retirement account. These contributions are usually deductible and can be performed up to April 15th
and count for the previous tax year. If you don’t need a tax break for the current year, a Roth IRA offers tax-free withdrawals upon reaching retirement age and your gains are deferred in the same way as a 401(k) or traditional IRA.
Check, Double Check, Triple Check!
There are many tax credits and tax write-offs available and it’s nearly impossible to remember them all, especially since more are added and subtracted each year. If you are computer savvy, consider using an online program that will help you along the way with adding things that might not have occurred to you. Once you’ve completed this process, you can file online (sometimes for free) at IRS.gov
. If you have any doubts at all regarding your tax return, contact your nearest tax professional, such as a CPA or a Financial Advisor, to help you through the process.
LPL Financial Advisors at Space Coast Credit Union are supported by the vast resources of LPL Financial, so you can be confident that your financial advisor has access to the tools, products, and investment services
to help you create and maintain a plan to help you pursue your retirement and investment goals. Meet our advisors
and request a consultation today!
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