The tax season is under way and if you have already filed your 2022 taxes, congratulations! So wait, why should you still care about your 2023 taxes (the ones you will file in 2024)?
Believe it or not, what you do now throughout 2023 can make a difference in your tax refund when you file your taxes in 2024.
We don’t expect you will cannonball into tax planning this second, but below are six tips to help you get your tax feet wet for next season and ensure you get your biggest tax refund yet, next year.
Tips for Tax Year 2023:
- Stay Organized. Now that you filed your taxes, make it easy on yourself for next year and stay organized. Start a folder of important documents and financial records, which will help give you a jump-start come tax time next year. If you are self-employed you can use QuickBooks Self-Employed to easily track your income, mileage, expenses, and capture your receipts the entire year.
- Consider reviewing your W-4 withholding. If you owed money when you filed your tax return, you may want to think about adjusting your withholding. Withholding is the tax your employer takes from your pay each check. The more withholding allowances you have the less tax is withheld from your paycheck but could be the reason you owed taxes. Reducing your withholding allowances will increase your income tax withholding so your paycheck will be less but the payoff will come next spring when you don’t owe money – and you may even get a refund instead! To update your withholding, simply re-file your W-4 form with your payroll department. You can choose to update it whenever you want throughout the year and TurboTax has a W-4 calculator to help you see how to adjust your W-4.
- Make charitable donations before the end of the year. Contributing to charity or donating goods can reduce your tax liability when you file your taxes next year. When deciding where to donate to, if you would like to get a tax deduction, you’ll want to narrow your search to charities that are considered not for profit 501(c)(3) charitable organizations. You can check to see if your charitable organization of choice is listed as an IRS qualified exempt organization. To keep track and value your charitable giving or donated items throughout the year, use TurboTax Its Deductible. The app will help accurately value and track your donations and easily import the relevant information into TurboTax when it is time to file.
- Lower taxable income by contributing to your retirement funds. Reduce your potential tax burden for next year by starting to plan for your future retirement. If you contribute to a 401(K) or a Traditional IRA, you will be able to take a dollar for dollar reduction in your income for your taxes. In 2023, you may contribute up to $22,500 ($30,000 if you’re age 50 or older) to your 401K and $6,500 ($7,500 if you’re age 50 and older) to your traditional IRA. If you are self-employed you can contribute the lesser of: 25% of your income or $66,000 to a SEP IRA.
- Learn something new: Maybe you want to learn a new career skill, update your skills in your current career, or study a subject that has always interested you. No matter the motivation, if your income is moderate, you may be eligible for the Lifetime Learning Credit. There is no limit on the number of years you can claim the credit and it is worth up to $2,000 per tax return. You don’t need to be on track for a degree to claim this credit, the Lifetime Learning Credit (LLC) is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution.
- Go solar and energy efficient: Under the Inflation Reduction Act signed into law in August 2022, solar energy credit increases to 30% if you purchased residential energy efficiency property like solar panels and solar water heaters between January 1, 2022 through December 31, 2023. There are also credits for electric vehicles purchased starting January 1, 2023 under the Clean Vehicle Credit.
If you still need to file your 2022 taxes, don’t worry about knowing tax laws and tax forms. You can go online and start now. Meet with a TurboTax Expert who can prepare, sign and file your taxes, so you can be 100% confident your taxes are done right. Start TurboTax Live Full Service today, in English or Spanish, and get your taxes done and off your mind.
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