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Time to Do Some Tax Season Prep

Make some changes now to save some cash on taxes

It’s the holiday season, which is not just the time of parties and carols, it’s the smart time to do a little tax preparation. A few moves before the ball drops on December 31 could result in saving a little bundle in 2019. Here are the moves you may want to make.

Put Money into a Retirement or College Savings Account

As Us News reports, a traditional 401(k) can protect some of your income from being taxed. In 2018, you can place up to $18,500 ($24,500 if you’re 50 or older) in your 401(k) and you won’t have to pay taxes on it until you make a withdrawal. If your employer matches your 401(k) dollars, you’ll be getting even more tax-free money. Just note that the clock on this is winding down quickly. Call your benefits department or plan provider and ask how to make a last-minute contribution. Similarly, you may live in a state that allows you to take a deduction for money contributed to a 529 college savings plan. Those contributions have to be made by year-end as well.

Meet with Your Advisor

If you have unusual income streams — perhaps you’re a freelancer — don’t wait to meet with your financial advisor or tax expert. The earlier you meet with them, the more time they’ll have to come up with ways to save you some cash.

Move Those Losses

If you made some cash by selling investments, you might get hit with capital gains taxes. However, there’s chance you can balance those fees out with losses. If you have investment holdings that are sitting at a loss, you might want to liquidate them to offset those capital gains. And if your losses are more than your gains, you could be able to deduct the difference — up to $3,000 per year, or $1,500 for married people filing separately — on your tax return.

Chris O'Shea

Chris O'Shea