In the middle of all the holiday buzz, it may be easy to forget tax season is just around the corner. Instead of giving Uncle Sam more than you may need to, here are a few adjustments you still have time to put in place that could save you money come April 15.
Contribute to retirement accounts
Maximize your 401(k) and IRA contributions. This is a good way to save on taxes by reducing your taxable pay. Also, it’s a great way to help you reach longer term goals. If your finances allow, calculate the dollar limit you have left to contribute. Then bump up those contributions to get as close to the maximum contribution limit set by the IRS. For 2017, the maximum you can contribute to your 401(k) is $18,000 or $24,000 if you are 50 and older. IRA contributions max out at $5,500 or $6,500 if you are 50 and older.
Sell off low-performing investments
“Tax loss harvesting” could be another way to lower your taxable income. This strategy works by selling investments (e.g. stocks, mutual funds, etc.) you’ve made that are now worth less than you initially paid for them. This may help to offset possible taxes from earnings or gains on income and other investments. This can be a tricky strategy to manage on your own. Be sure to talk with a tax professional to ensure you’re making the right decision.
Benefit from HSA and FSA contributions
An HSA (Health Savings Account) is a tax advantaged medical savings account for people with high deductible health plans. An FSA (Flex Spending Account) is part of employers’ benefits package. Contributions get made on a pre-tax basis and are used for qualifying out of pocket medical expenses. These contributions help to reduce your taxable income in the new year.
So consider acting on these tips before December 31. You may lower your tax bill and keep more money in your pocket.
Article provided by Local Government Federal Credit Union.
The advice provided is for informational purposes only. Contact a tax advisor for additional guidance.