Summer vacation is over and the kids are back in school. It’s time to take a breather, because before you know it Halloween, Thanksgiving, Hanukah and Christmas will be upon us.
This tiny lull in the action provides the perfect opportunity to review your tax situation for 2016 and get your stuff in order. Because in the blink of an eye, it will be January and you will be scrambling to get these items together! If you review the following this fall, come tax time, you will be way ahead of the game.
Ensure the right amount is being withheld from your paycheck.
Changes in your income – a new job, the birth or adoption of a child, or receiving income without having any taxes withheld (i.e. rental or investment income) can result in the need to change your withholding.
Gather your receipts
Now is the time to ensure you have all the documentation for those tax deductible items that you don’t want to forget about! Charitable donations, mileage logs, unreimbursed business expenses and property tax payments are all examples of things that can help reduce your taxable income.
Pull together summer camp expenses
If your child went to summer camp while you were working or looking for work, you may qualify for a tax credit. While the cost of overnight camps does not qualify, any day camp or other sitter or daycare facility usually does. Depending on your income, your credit may be up to 35% of your qualifying expenses. Make sure you have the receipts and tax identification numbers for these providers.
Take action to reduce your taxable income before year end
If you review your current situation and determine that you may still end up owing tax at the end of the year, you may be able to take steps towards reducing the liability. Examples of actions you might want to consider include paying property tax installments early, selling off investments that will create a loss (can be used to offset investment income), accelerate a charitable donation you were planning on making early in the new year.
By reviewing your tax situation well before the end of the year, not only can you ease that tax time headache by being organized before you start, you can take a proactive approach to reducing your tax bill.