With the holidays just around the corner, the last thing you want to think about is probably taxes. If you are like many people, you wait until April to even look at your taxes. Maybe you are even one of those people who waits until midnight of the tax deadline to send off your returns. After all, why deal with the pain now if you can put it off for months?
This is probably especially true if you typically owe the IRS or are consistently disappointed with a lower refund than you expected. However, by planning early, you may be able to maximize the chances of a more positive tax season. In fact, you can do a few things before 2017 ends that may lower your tax bill.
Making the most of your deductions
One thing you may want to do now is to decide whether it will benefit you more to take the standard deduction or to itemize. If you recently purchased a house, made large charitable contributions or had qualifying medical expenses, you may find your itemized deduction total is higher than the standard deduction. If you are planning to itemize, financial advisors suggest you take full advantage, for example:
- Moving to November or December any medical procedures planned for 2018 so you can add them to your medical deduction
- Making charitable contributions in the spirit of the holiday season
- Cleaning out your closets and attic and donating your unwanted things
- Paying your January 2018 mortgage payment
Remember that that higher your income, the higher your tax bracket may be, so if you're expecting a bonus in December, ask HR if you can postpone receiving it until January. You won't be able to enjoy the extra funds for Christmas, but it may be worth it if your tax bill is lower.
When to seek help
You may be able to sell some of your investments at a loss to balance any capital gains from profitable investments. However, this is a tricky operation, and you will certainly benefit from professional advice. Selling investments that could turn profitable in the future just for a tax break may not be the wisest move.
Finally, you may find other areas of your finances where you could reduce your taxable income or increase your deductions by preparing early for tax season, especially if you have complex assets like investment properties or a small business. The advice of someone with experience in California tax law could prove invaluable.