Year-Round Tax Planning

Tax season is pretty much history unless your returns are on extension.  For most people, once our tax returns are filed, we tend to not give them another thought until the beginning of the next year. 

To minimize your tax liability, you need to think about taxes all year round.  Thinking about deductions and credits will help in this regard.  Waiting until you are ready to prepare and file your taxes could result in your not taking full advantage of allowable credits and deductions. 

Here are some things to consider:

  • Standard or itemized deductions – which is better?  Well, it depends upon your situation.  And, you may not know which is most beneficial until your taxes are prepared.  So, it is helpful to accumulate information throughout the year for:
    • Medical expenses – doctors, dentists, eyeglasses/contacts, hearing aids, physical therapy, medications, medical devices, etc.
    • Medical insurance premiums include long-term care premiums
    • Property taxes
    • Charitable contributions both cash and in kind.  If you donate goods to a charity, keep the receipt and a description of what you donated.  (During the past couple of years, a credit for those taking the standard deduction has been allowed in a limited amount.  However, you are required to have receipts to support even those deductions.)
    • Mortgage interest
  • Credits don’t just include the amount of taxes you have paid in throughout the year.  There are credits for:
    • Child care
    • Elderly care
    • Learning
    • Child tax
    • Earned income tax credit
    • Recovery rebate credit

These credits and deductions can reduce taxes owed or boost the amount of your refund.  Some of the tax credits are refundable, which means that if you are eligible, you can get money refunded even if you don’t owe any taxes. 

Remember, to properly claim these credits and deductions, you MUST have records to show your eligibility.  So, don’t just think about income taxes during tax season. Keep them in mind all year long. 

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About the Author

Kay Sowa is a paralegal in the Trusts and Estates Group at Capehart & Scatchard, P.A. She is an IRS Enrolled Agent, an Accredited Estate Planner®, and a Certified Trust and Fiduciary Advisor. She oversees the trust and estate administration practice for the firm. She is an accomplished author and lecturer who has frequently spoken on behalf of a number of organizations including the National Business Institute and the Institute of Paralegal Education.

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