End of Year Tax Tips
While I know everyone is still getting ready for Christmas or New Year’s, I would like to take a moment and talk about some end of the year tax tips. I know I am always telling people that tax prep is a year-long endeavor, but some crucial contributions have a deadline of January first.
- You have until December thirty-first to contribute to your 401(k). The yearly maximum is $19,500, with those over 50 able to contribute an additional $5,000. This is money that will not be taxed until it is distributed later on when you are eligible for retirement. So you will need to get this done as soon as possible. This contribution reduces taxes now and saves for the future.
- If you have a Health Savings Account, you can contribute up to $7200 for a family and $3600 for an individual before the year’s end. This is an efficient way to pay for medical expenses with pre-tax dollars, which always helps.
- Charitable giving also needs to be done by December thirty-first to receive credit for the tax year 2021.
- Retired people over the age of 72 must make their required minimum distributions and pay taxes on that money. This was suspended for 2020 but was reinstated for 2021.
- If you expect to deduct business expenses, now is the time to make sure you get all those receipts together and safely. You will be happy you did in a few months.
I hope this serves as a gentle reminder that tax preparation should be proactive and not reactive. Today’s organization will pay off significantly come tax time. With that being said, you must meet some deadlines before the dawn of the new year.
Happy New Year!
Please reach out to us if you have any further tax questions or anything else that you may need consulting on.
I look forward to talking with you or answering any questions.