The days are getting shorter and we’re already into the “-ber” months… You know, the ones that draw us to the end of the calendar year.
You may not be thinking about your 2021 end-of-year taxes just yet since April 15 seems far away, but maybe you should. Bellco Credit Union has come up with a list of five things you may be able to do before the end of the year to minimize what you might owe on your 2021 taxes.
1.Put more in your retirement funds: Check with your employer to see if you can increase the amount you put in your 401K every month. Some employers allow you to make changes anytime, while others limit you to once a year. If you can, increasing your contribution reduces your taxable income, meaning you pay less in taxes at the end of the year.
If you don’t have a 401K through your employer, you may be able to make a tax-deductible contribution to a traditional IRA. There is a limit to what you can contribute each year to a retirement plan, but if you’re over 50, you can put aside even more.
2.Adjust your W-4: The W-4 is a form you provide to your employer instructing them how much to withhold in taxes from your pay. You can increase your withholding now to have more taken out of each paycheck so that you don’t have as much to pay when taxes are due.
3.Keep track of expenses: If you’re self-employed or have a side gig, home office or other related expenses might be deductible. Be sure you’re tracking and keeping proper records of how much money goes where.
4.Increase your skills while earning credit. The government offers a lifetime learning credit of up to $2,000 per year to help pay for qualifying educational and job-skills expenses. If you’ve already been taking classes, be sure to hang on to all documentation, and if not, look into whether this is a viable credit for you.
5.Make charitable donations: Finally, do something that helps you while it also helps others. Cash and material donations to 501(c)(3) organizations, as well as qualifying religious entities like churches, are tax-deductible up to a certain limit. In order to deduct your charitable contribution, you must not receive anything in return. For example, if you purchase a table for a charity event, only a percentage of the ticket price will be tax-deductible. The charity should provide that information at the time you make the purchase. Make sure to get a receipt from the organization to show your tax preparer.
While these ideas are meant to get you thinking, Bellco recommends that you consult a tax adviser now to start planning for year-end for their advice on how to reduce taxes for your specific situation and for information regarding the deductibility of any of these options.
Bellco is one of Colorado’s largest financial institutions, with more than $5 billion in assets and 26 branches in Colorado. Founded in 1936, Bellco offers a full range of financial products and services including home equity loans, auto loans and checking accounts. Today, Bellco has more than 345,000 members who benefit from the advantages of a credit union, including lower interest rates on loans, higher yields on savings and access to thousands of ATMs nationwide. Connect with Bellco on Facebook and Twitter. Bellco is federally insured by NCUA.