7 Ways to Minimize Next Year’s Tax Burden

Tax season can be a stressful time for many people, especially if you’re not fully prepared. However, with some advance planning and preparation, you can take steps to minimize your tax burden for the coming year. Here are 7 things you can do now to trim your tax bill.

Contributing to a retirement account such as an Individual Retirement Account (IRA) or a 401(k) plan can help reduce your taxable income. The money you contribute to the traditional version of these accounts is typically tax deductible or sidesteps taxes temporarily (aka tax deferred), and any earnings within the account grow tax-free until you withdraw them in retirement. 

If you are past the point of contributing to retirement accounts and have a Roth IRA or Roth 401(k), you may also be able to minimize your tax burden by pulling from these accounts and enjoying the tax-free distributions.  

Charitable giving is a great way to support causes you care about while also reducing your tax bill. If you itemize your deductions, you can deduct the value of your charitable contributions from your taxable income. Make sure to keep records of your donations to substantiate your deduction.  

Additionally, more advanced options, such as qualified charitable distributions, also offer a way to minimize your tax burden.  

If you or your dependents are pursuing higher education, there may be tax credits available to you. The American Opportunity Credit and the Lifetime Learning Credit are two examples of credits that can help reduce your tax bill. 

If you have investments, you can minimize your tax liability by planning your capital gains and losses strategically. For example, you can offset capital gains by selling investments that have lost value. Talk to an advisor about how to handle your gains and losses.

If you own a business, you may be able to take advantage of a variety of deductions to reduce your taxable income. Business expenses such as office supplies, travel expenses, and advertising costs are typically deductible. 

Keeping accurate records of your income, expenses, and deductions is essential for reducing your tax bill because if you are audited, not having accurate records can be costly. Keep all receipts and other documentation related to your tax return in a safe and easily accessible place. 

Finally, if you’re unsure about how to minimize your tax burden, it may be worth consulting with tax and/or financial professionals. A tax professional can help you identify deductions and credits you may have missed and provide guidance on how to minimize your tax liability. 

There are many steps you can take now to trim your tax bill. By being proactive, you can reduce your tax liability and potentially save yourself thousands of dollars. 

For personalized advice about minimizing your tax burden, reach out to an advisor using the form below.  

Adapted from: “7 Things You Can Do Now to Trim Your 2023 Tax Bill.” FMeX. 2023. https://abm.emaplan.com/ABM/MediaServe/MediaLink?token=ac36cf219cd34aa2bfcaa92525d4d7bd