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A smart way to approach tax planning would be to look ahead, not back. Run through this list of tax-saving ideas to make sure you’re taking advantage of all the available opportunities to reduce your tax bite. Good tax planning will return taxpayers more dollars than clever tax preparation.
Accurate records. The best way to save on taxes is to keep accurate records in a folder for year-end tax planning. Go through your check register for appropriate deductions. If you entertain for business, back up restaurant stubs with notations or diary entries showing the date, place, name of the person entertained and business purpose.
Bunching deductions. You may find you don’t have quite enough write-offs to exceed the standard deduction. In that case, see whether there are some deductible expenses you expect to incur next year that you can make this year to let you itemize and get extra write-offs.
Charitable costs. The cost of traveling, mileage and parking for charitable purposes is deductible for volunteer workers.
Education Planning. Maximize a “529” college program for your children. New York State allows a deduction of $5,000 for single filers and $10,000 for married.
Estimated state taxes. If sent before Dec. 31, the payments are deductible in the current year.
E-file. It is popular because it is fast, safe and accurate. An electronically prepared and filed return has an error rate of less than 1 percent compared to an error rate of 20 percent for a paper-prepared return. Also, taxpayers can receive a refund in as little as 10 days.
Gambling losses. If one has gambling winnings during the years, such as OTB or Lotto, and you itemize, you can deduct gambling losses only to the extent of your winnings. Therefore, it is wise to save your receipts, tickets, or statements to document your losing wagers until the end of the year.
Fund or “max” out retirement plan. You can fund your traditional or Roth IRA. Also, you can contribute $20,500 to your retirement plan; add $6,500 if over 50.
Investment losses. Stock losses can be deducted to offset gains or to reduce your taxable income up to $3,000. Any additional losses are carried over to the subsequent year. For example, if you are in the 37-percent tax bracket, you would increase your refund by $1,110.
Property-tax reduction. Many states reduce real-estate taxes for taxpayers who are 65 or older, veterans or disabled. Take advantage of any general homeowner’s exemption. Review your property assessment for accuracy and file a grievance to seek a correction.
Getting a start on your tax planning before the New Year begins can help you to maximize benefits and minimize taxes.
Barry Lisak is an IRS enrolled agent specializing in personal and small business taxes for 30 years. Any questions can be directed to him at 516-829-7283, or mrbarrytax@aol.com.
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