End of year tax planning tips that really work
Even though it’s just the beginning of fall, it’s not too early to start your end of year tax planning. Due to the long list of tax changes for the 2021 tax year, you would be well-advised to start planning for them now.
The more tax planning you do now, the more money you may be able to save in the long-run. In addition, effective tax planning can help reduce estate taxes, maximize the amount of money you will have available for retirement, reduce the price tag of your child’s education, and help you to manage your cash flow in order to meet all of your financial objectives.
Year-end tax planning tips can help you avoid any potential trouble with the IRS. However, it’s important to get advice from a financial professional or tax expert who has knowledge of your individual financial situation.
Some quick year-end tax planning tips include:
1. Create a tax planning strategy
2. AMT tax strategies
3. Year-end capital gains and losses
4. Make the most of GivingTuesday
Creating a tax planning strategy can not only help you to reduce your current year’s tax, but may help reduce any potential future taxes. A caveat — in order to identify strategies that will help your particular situation, you’ll want to enlist the services of a CPA with a thorough knowledge of tax laws and how they apply to your current as well as your future financial situation.
Those taxpayers most likely to be hit by the AMT tax are those whose taxable income exceeds $1 million, although, depending upon the type of income and deductions you take, you may still get hit by the tax with as little as $200,000 in income. Your tax professional can employ some strategies to help reduce or even eliminate your AMT.
There are a variety of steps you can take when it comes to year-end capital gains and losses depending upon if you have:
- Both short- and long-term losses
- Long-term gains in excess of short-term losses
- Both short- and long-term gains OR short-term gains in excess of long-term losses
- Worthless securities and bad debts
Consider bunching donations to your favorite charitable organizations on GivingTuesday this year. If your charitable contributions exceed this year’s standard deduction amount, you can itemize your deductions.
End of year tax planning for 2021 can help you to achieve the following:
- Reduce liability for the current year’s taxes
- Defer payments of the current year’s tax liability to future years, free up available cash
- Maximize tax savings from allowable deductions
- Minimize Medicare Contribution Tax on net investment income
- Minimize capital gains tax
- Avoid penalties for underpaying estimated taxes
- Minimize the effect of the AMT on your tax liability for 2021
- Maximize the amount of wealth that remains in your family
- Maximize your tax saving by taking advantage of available tax credits
- Minimize potential future estate taxes
Enlisting the services of a personal CPA can help you achieve the above goals and more. At GYL CPAs and Advisors, our professionals we will review and advise you on your taxes. Our CPAs will look at your entire financial picture, long- and short-term, and prepare your taxes accordingly. Contact us to schedule a free consultation.