The end of the year is usually the busiest time for taxpayers. You’re usually trying to get everything wrapped up and finished before the new year begins. One thing you should put on your list for the end of the year is to start calculating your taxes and if you will owe taxes when you file. If you find out you are going to owe taxes, there are some steps you can take to lower your tax liability. Tax planning is an important part of keeping your financials in line and can help you stay on track and make filing your tax return easier.
If you think you will owe taxes, one step you can take to lower that amount is you can contribute more to your retirement. This is a win-win solution. Not only are you helping decrease your tax liability, you are also saving for the future. IF you currently contribute to a 401 (k), you can contribute up to $18,500 a year and if you have an IRA, you can contribute up to $5,500. These numbers will increase in the new year. Another bonus for taking this step is you may qualify for another tax credit! The Savers credit is worth up to $1,000 and is available to lower to middle-income taxpayers who are contributing to their retirement. Remember, tax credits lower your tax liability dollar-for-dollar. You can talk to a tax consultation or tax attorney about if you qualify for this credit.