As tax season comes to a close, it’s probably a bit of relief to have the annual exercise behind you. But done right, tax planning is a year-round exercise. Here are a few timely reminders to make the most of your tax planning:
- Review your tax withholding rates. Did you owe taxes or get a big refund? Will your income increase or decrease this year? If you answered yes to either of these questions, you may need to adjust your withholding rate or make quarterly payments. Now is a great time to assess and make modifications as necessary to avoid any year-end surprises.
- Adjust contributions to your 401k plan. Contribution limits increased this year to $23,500 per person for employees under 50. If you are over 50, you can make a catch-up contribution up to $7,500. If you are 60 – 63, your catch-up contribution is $11,250. These are your contribution limits and are separate from employer contributions. You’ll appreciate these extra dollars when it comes time to enjoy retirement!
- Consider contributing to a Roth IRA. If eligible, consider making contributions to a Roth IRA and take advantage of tax-free growth. Roth IRA contribution limits remain at $7,000 for individuals under 50 with a $1,000 catch-up for those over 50. Roth IRA’s are the ‘low hanging fruit’ when it comes to minimizing future taxes.
Making a few small adjustments today can have a big impact down the road.
