The end of the year is quickly approaching, and that means it’s time to start thinking about and planning your tax write-offs! If you want to maximize your deductions, you can do a few things before December 31.
Following these tips can reduce your taxable income and save money on your taxes.
1). Contribute to Your 401K (Retirement)
A quick way to write off taxes is to contribute or open a 401K account. A 401K is a tax-advantaged retirement account where you can contribute up to $20,500 in 2022. With a 401K, your contribution allows you to invest and defer capital gains until you withdraw the money at retirement age. However, you gain the immediate benefit of writing the contribution off on your taxes.
You can open a 401K account in minutes by signing up with a broker that offers 401K trading accounts. If you already have a 401K account, be sure to make your contribution before December 31.
2). Make Charitable Donations
Another quick way to write off some of your taxes is to make a charitable donation. “You may deduct charitable contributions of money or property made to qualified organizations if you itemize your deductions. Generally, you may deduct up to 50 percent of your adjusted gross income, but 20 percent and 30 percent limitations apply in some cases.”
3). Make Next Year’s Business Expenditures This Year
If you run a business, you already know that much of what you spend on that business can be written off. However, if you want to maximize your tax write-off, you should start making next year’s business expenditures this year.
For instance, let’s say your business purchases $10,000 of inventory each quarter. You can consider purchasing the inventory for the first quarter of next year during the fourth quarter of the current year. This will allow you to take an immediate write-off.
4). Take a Class Use Your Lifetime Learning Credit
Finally, you can take a class and use some of your Lifetime Learning Credit. Currently, you can write off 20% of up to the first $10,000 of qualified education expenses or $2,000 per tax return.
A Lifetime Learning Credit can be used for tuition and related expenses such as books, supplies, and computer equipment related to the class or the course.
By following these tips, you can maximize your tax write-offs and save money on your taxes. Speak with your tax professional about planning your deductions today!