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? But getting a head start on your taxes pays off. As Money Talks News founder Stacy Johnson wrote earlier this year:
Whether you use software, pay a pro or do them yourself, understanding how taxes work can pay off in the form of hundreds, or even thousands, more in your pocket. Just as important, knowledge gives you confidence: no more wondering if you’re doing everything you can to make your bill as low as possible.
While tax planning isn’t anyone’s idea of fun, it doesn’t have to be long, difficult or painful. If you already have tax debt, your first move should be to look for help in our Solutions Center.
Once you have taken care of the debt, it’s time to think about how you can save. 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, an amount that can be deducted from your taxable income. If you’re 50 or older, a catch-up contribution option of $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 2016, 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 you 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 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 2016, you can contribute up to $3,350 to your HSA if you have single coverage, or $6,750 for a family plan.
In 2017, the limit will increase by $50 for individuals, but stay the same for families.
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.
You can read this article for some tips on how to evaluate financial advisers.
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.
Sure, this is shameless self-promotion, but we have an excellent knowledge base of information at Money Talks News. Search for “tax hacks 2016” for a collection of our articles from the past year.
Do you have any great tips for saving $1,000 quickly? Share your thoughts by commenting below or on our Facebook page.