It feels like yesterday we were just in January and in the blink of any eye, November is here. With the holidays quickly approaching, our brains are buzzing with questions like: Who is hosting Thanksgiving this year? What do I get the kids for the holidays? The last thing we’re thinking about is how to decrease our tax liability for the year. That’s where we come in - consider ASE Group to be your tax fairy godmothers. Here’s some tips to consider for maximizing your tax deductions and minimizing your tax liability this season.
Review Your Filing Status:
Did you get married (or divorced) this year? Expand your family? Being caring for a parent or family member? Choosing a filing status can affect your refund's size, especially if you're married. With the Married Filing Jointly status, you will include both you and your spouse's taxable income, exemptions, deductions, and credits on one tax return. Even if you or your spouse had no income or deductions, you can still file a joint return.
With the Married Filing Separately status, you each report your own income, exemptions, deductions, and credits on two separate tax returns.
Remember, if you're legally married as of December 31 of a given tax year, you are considered to have been married for the full year.
Maximize Your Contributions:
Contributions to a traditional 401(k), 403(b) or other employer-sponsored plan, or to a traditional IRA, are tax deductible in the year the contribution is made (just remember, tax deductibility at the Federal level may be different than at the State level). Traditional IRA contributions can reduce your taxable income if your taxable income is below a certain threshold, and Roth IRA contributions can be disallowed if your income exceeds a certain amount. Be sure to review your contribution plans with your accounting team to ensure you’re able to take advantage of the maximum contribution (remember, there’s a catch-up provision in place if your 50+ years old).
Make a Charitable Donation: Both cash and noncash contributions/donations to qualified charitable organizations have the potential to reduce your tax liability. It’s important to understand if you benefit from itemizing deductions on your tax return so that these contributions can make an impact on reducing your taxable income. Generally, you can deduct up to 60% of your adjusted gross income in charitable donations. However, depending on the type of organization and type of contribution, you may be limited to 20%, 30%, or 50%.
If you volunteer at a qualified charitable organization, don’t forget that you can also deduct your mileage (14 cents of every mile) driven for charitable service. Make these donations count on your taxes by donating by December 31st. Even if you make a donation via credit card by December 31, you do not have to pay it off until the new year to receive the tax deduction.
Spend Your FSA: If you have money left on your Flexible Spending Account, use it to pay off pending medical bills or for any visits before the end of the year. You can also use it on things like prescriptions, dental work, vision expenses, eyeglasses, contact lenses, therapy, chiropractic care, and more. Take care of yourself and maximize that FSA – health is wealth.
Other Dependent Credit: If you support your parents, grandparents or loved ones and they qualify as a non-child dependent, take advantage of the Other Dependent Credit worth up to $500.
Go Green: Go green with your home energy and gas sources to save on your bills and qualify for energy efficient or electric vehicle credits.
These are just a few ways to maximize your tax deductions and minimize your tax liability. To explore more options and make sure you’re not missing out on any credits, consult with us, your tax fairy godmothers at