April in October. 3 things you can do now to make tax season painless
Most of us have heard the phrase ‘Christmas in July.’ Some of you may even consider it a little worn. It’s usually assigned to some event or sale designed to separate you from your money.
So, let’s make a new out-of-season event to help you keep more money in your pocket. We’ll call it “Tax Season in October.”
Okay, that may not have the same ring as Christmas in July. But the name might catch on if more people knew some of these fall tax tactics!
Let’s look at a few right now.
File your extended return
If you filed for an extended return, Oct. 17 is your deadline under normal circumstances. However, if you were affected by a natural disaster, you may be an exception.
Here are the ones the IRS listed for 2022.
- Residents of Puerto Rico have an extended deadline to file 2021 taxes due to Hurricane Fiona. The new date is February 15, 2023.
- Residents of Florida affected by Hurricane Ian have until Feb. 15, 2023 to file taxes.
- Victims of the Mississippi water crisis have until February 15, 2023 to file individual and business returns for 2021 and make 2022 estimated tax payments.
- Kentucky and Missouri residents affected by the July and August storms and floods have an extended deadline of November 15, 2022, to file 2021 taxes. This also applies to quarterly estimated taxes normally due on September 15, 2022.
Evaluate your investment strategy
2022 will go down in the history books as one of the roughest years in the stock market. Chances are you’ve watched your own portfolio plummet. But it’s not all bad news. Sometimes investment losses can help you out on your taxes.
Any losses after matching short-term and long-term losses might offset the opposite kind of gain. You can use up to $3,000 of that loss to offset ordinary income.
Just remember that if you sell an asset at a loss, you have to wait 30 days before reinvesting in it or buying an identical investment. That’s called the “wash-sale” rule.
It does not apply to investments held for more than a year by single filers who earn less than $41,675 annually or for joint filers earning less than $83,350.
Max out pre-retirement savings
Try to max out contributions to any retirement plans available. If you have a 401(k), 403(b), or a federal Thrift Savings plan, then your maximum is $20,500 per year. If you are over 50, you can put in another $6500 annually.
This will reduce your take-home pay, but it will also lower your tax bill.
Don’t forget about state taxes. Several states afford tax breaks when contributing to 529 Savings Plans. Just be aware that you must be a resident of the state from which you contribute.
In Louisiana, up to $2,400 can be deducted annually for each beneficiary. That number bumps up to $4,800 for married couples filing jointly.
Don’t go it alone
These “Tax Season in October” ideas can help you save money, but everyone’s circumstances are different. So take the time to do some research and find out more. Even better, reach out to a trusted CPA to see what you can do now to get ready for next April.