While it’s true that most New Year’s resolutions fade by springtime (remember that gym membership?), there are some resolutions that will truly benefit you in the long run. By adding add tax matters to your New Year’s resolution list, you could save some serious money come tax time next year.
Get organized: Set up a filing or folder system, and add tax documents throughout the year (receipts for itemized personal and business expenses, and bank statements, for example). You’ll avoid the the rush to gather everything at the last minute, and you’ll have the forms handy should you need to refer to them periodically.
Update your W4 withholding form: If you welcomed a new child into your family, update your withholding status so more money goes into your pocket throughout the year. Likewise, if you no longer claim your child as a dependent on your tax return, update your W4 to indicate this change.
Understand your standard deductions: If you’re single, your standard deduction increased to $12,400. The rate for married joint tax filers is now $24,800.00
Stash money in your HSA: If you have a high-deductible insurance plan, chances are your employer also offers an HSA (Health Spending Account). A single person can contribute up to $3550.00 tax free each year. Those on family plans can contribute up to $7100.00.
Even better, you can roll over HSA funds from one year to the next, possibly taking the sting out of any unexpected medical bills that may pop up.
If you have a health care FSA (Flexible Spending Account) the rules are a little different: you can contribute up to $2700.00 tax-free. Unlike an HSA, however, you can’t roll the funds over into the next year.
Build your nest egg: Saving for retirement can be tough when you’re tied down with housing expenses and student loan debt. If you’re among the lucky ones with access to an employer sponsored 401K, 403 (b) or 457 account and you have the means to set aside a little each pay period, you can contribute up to $19,500 tax-free.
You’ll be saving for your future and lowering your tax bill at the same time.
If you’re over 50, you can contribute an additional $6500.00 to your 401k, 403 (b) or 457 account tax-free.
If you have an IRA instead, your max contribution is still $6000.00, which is the same as last year.
Hire a tax pro: Life is full of changes. Major milestones such as marriage, children, home-buying, relocation, raises, and college tuition not only impact you personally, but also present new challenges for your taxes. The same goes for retirement, disability, or relocation.
One way to lessen the “sticker shock” at the end of the year is to hire a tax pro, such as a CPA. They understand the intricacies of the tax codes, and how they will apply to your situation.
Unlike the gym membership that’s collecting dust, these New Year’s resolutions could save you some serious money in the long run.