End of Year Tax Planning: Start Now!

We are almost halfway done with October! That means we have a couple months left to make our year end tax moves. I always like to have a look at my income for the year, project what I will be earning for the rest of the year, and make moves accordingly. Luckily I am on salary so this is relatively simple.

This is the time of year when I take a good look at everything. I project what my tax refund or liability will be and use that to form a plan. I decide how much to donate, what stocks to sell and keep (if any), what to contribute to my retirement accounts over and above my normal contributions, and so on. All of these have an impact on my tax bill.

I also use this time to go through my stuff. The holidays are coming up so I start to dig through my things. I can donate food and clothes to those who really need it. I look through my stuff for anything I can sell or use as a gift (one less to buy!). I do a thorough cleaning of my closest to reduce my clutter. I am in a never ending battle against stuff and this helps out the cause!

I also do a little searching online for extra tax credits. I want to get all the credits available that I can to reduce my tax bill. The rules and credits change all the time so it is good to knock out a few housekeeping items to be sure you get the most out of your 1040. Examples: Energy efficient credits, healthcare itemized deduction threshold, healthcare spending accounts, etc.

My final and arguably most important item on the list is to make a list! The list includes:

  • Projection of tax refund or amount owed.
  • To Do list of donations, selling, investing, etc.
  • Cleaning and paring down of my stuff.
  • List of all tax forms that I will need to file my return (1098's, 1099's, W2's, etc).
  • My intentions of how to use a tax refund (if any). 
Tax Planning does not have to be just numbers, calculators, and hard decisions.  Doing this bit of work now saves scrambling later, missed opportunities, and added stress during the holiday season. You don't want to be worrying about selling stocks or making donations at the dinner table with extended family. Save yourself some grief and get to work now!