In the grand scheme of things, minor actions can significantly impact your finances and tax situation. To avoid a penalty, you must file your 2022 taxes by April 18th, 2023. But you can take action while you wait, which can substantially impact your tax liability. Here are some of them.
Donate To Charity
Help those in need and lower your tax bill by donating to charity before the end of the year. Typically, you can only deduct charitable donations if you itemize your tax deductions.
Pretax contributions to retirement accounts have the benefit of lowering your current-year income tax obligation. Before you pay taxes, you can put money into a retirement plan at work, like a traditional 401(k).
Verify Tax Withholding Ensure you're withholding the right amount of tax from your pay. Incorrect withholding could place you on the hook for a big tax bill or snag a refund. According to Galstyan, not withholding enough tax may result in owing money when filing your income taxes and receiving unexpected bills.
You can delay getting paid to pay less in taxes this year if your company has a policy of paying year-end bonuses the following year. As Galstyan points out, if you work for yourself, are a freelancer, or offer consulting services, you have more freedom.
If you stash money in a 529 plan before year-end, it may lower your state tax tab. Most states allow you to deduct at least a portion of your 529 plan contributions from state income taxes.
An investment loss can be used to offset income or capital gains, and a tax offset can lower your gains tax. If you have more losses than gains, you can only deduct $3,000 in excess losses to offset other ordinary income and carry the balance over to the following year.