All you need is a half-hour of time to keep up to $1,000 in your pocket in April. Here are six great ways to do it.
Can you really save up to $1,000 in only a half-hour? Absolutely.
However, there is a catch. We have to talk about taxes.
I know! Who wants to talk about taxes in September?
While tax planning isn’t anyone’s idea of fun, it doesn’t have to be long, difficult or painful. Following are six ways to spend 30 minutes now to save an extra $1,000 next April.
1. Find deductions hiding in your closets. Clean out your closets and take the contents to your favorite thrift store for a tax deduction. Set the timer for 30 minutes and go wild.
Be ruthless. Those skis Junior never used? Gone. The baby clothes from your 4-year-old? Outta here. The scrapbooking supplies that haven’t seen the light of day in two years? Sayonara.
This strategy has a double benefit. Not only do you get a deduction that can lower your tax bill next year, but you’re also making space just in time for the rush of holiday gifts that will be arriving shortly.
2. Beef up your retirement savings. Take 30 minutes to review your retirement accounts and see if you can afford to contribute a little more. For 401(k) and 403(b) accounts through your workplace, you can contribute up to $18,000 this year, an amount that can be deducted from your taxable income. If you’re 50 or older, a catch-up contribution option now raised to $6,000 means you can contribute up to $24,000.
You also can contribute money to your own IRA and get the same tax benefits. IRA contributions for most workers are maxed out at $5,500 in 2015, with a catch-up contribution option of $1,000 making those 50 and older eligible to contribute up to $6,500.
Depending on your tax bracket, you could save 30 cents in taxes for every dollar you contribute to an eligible fund. Remember, there are income caps for some of these deductions, and you get an immediate tax benefit only if you have a traditional 401(k), 403(b) or IRA.
If you have a Roth account, you don’t get the tax benefit upfront, but will get it later after you retire.
3. Dump your stock losses. If you have some stocks, grab a cup of coffee and spend 30 minutes reviewing your portfolio.
Are any perpetually underperforming? If so, now is a perfect time to dump them. You can deduct up to $3,000 in losses from your income. For some taxpayers, that’s enough to save them as much as $1,000 at tax time.
While you’re reviewing your stocks, don’t forget you can donate them to charities, too. Make a gift of some overachieving stock to your favorite 501(c)3 organization. Then, take a deduction for its full value.
You avoid the capital gains tax by making a donation and potentially reduce your tax liability with the deduction. In addition, because the organization is tax-exempt, it can cash in without paying taxes either. It’s a win-win.
4. Max out your health savings account. Millions of Americans who have an eligible high-deductible health insurance plan can save money by opening or adding to their health savings account, or HSA.
These accounts let you use tax-free dollars to meet your deductible, co-pay and co-insurance requirements. In 2015, you can contribute up to $3,350 to your HSA if you have single coverage, or $6,650 for a family plan.
If you have the financial means, maximizing your HSA contributions each year can be an excellent way to reduce your tax liability. Your HSA will roll over each year, so you can build up a healthy savings account for medical emergencies.
5. Check in with a pro. Meeting with a financial pro will probably take longer than 30 minutes, but you only need a half-hour to find someone and make an appointment.
Despite the fact that I feel confident managing my own money and savings, I recently sat down with an adviser for a financial checkup. I didn’t go into the meeting expecting much but was surprised at the outcome.
Having a fresh set of eyes looking at the numbers proved to be helpful in identifying new ways to save. It also gave me a shot of motivation to stay the course when it comes to sticking to my spending and saving goals.
Remember, some professionals might be more interested in making money than working in your best interests. However, if you can find the right adviser, he or she should be able to provide information and advice on how to minimize your tax liability, maximize investments and cut out unneeded expenses and fees.
6. Spend a little quality time online. Finally, if you don’t feel inclined to meet with an adviser, at least spend 30 minutes looking for DIY ways to save money in advance of tax season.