December 29, 2020
End of Year Tips to Make 2021 Less Taxing
Complete the following sentence:
Taxes are _______________.
Some of us might say “stressful” or “confusing.” But Dave McLaren, CPA, CGMA, CRFAC, ABGOV, RFI, CRFAU and Founder of McLaren & Associates CPAs, PC in Shrewsbury, has a different answer.
“Taxes are complicated.”
Few can argue with that. The tax laws are often hard to understand and constantly changing. And the impact that they have on us varies from person to person, return to return.
But while our tax situations are unique, Dave McLaren believes that there is one important thing we can all do this time of year to put us in a better position for April – plan.
“Planning this year for taxes can help you avoid any surprises in 2021,” advises Dave.
And let’s face it, we’ve had enough unexpected events in 2020!
A tax planner can help you review your withholdings and deductions for the year and determine the impact they will have on your tax refund or the amount you owe. Once you know where you stand, you may be able to take some steps to lower your tax burden.
Below are 5 important ways you can help lower your taxes in 2021:
1.Charitable donations. Want to make a difference in your community and on your tax bill? You can make tax- deductible contributions to qualified charities in 2020. You can donate cash and personal property, such as clothing or furniture. If you do, you’ll need to obtain a receipt for money donations valued over $250 from the non-profit to which you donate. Non-cash donations need a receipt for anything you donate.
Have a larger item you’re thinking of donating, such as a car? You’ll have to have an appraisal for the value of the donation as proof of your deduction if the value is over $5,000.
If you want to make an even bigger impact on your giving and tax-saving, you can donate directly from your IRA retirement account up to $100,000, helping keep your income down. You can also donate stock that has either increased or decreased in value. If it’s lost value, though, you should sell it first to get a full tax deduction for the loss, then donate the money. You can also donate appreciated stock to get full deduction and avoid paying tax on the gain.
2.Expenses. Understand what you can and cannot deduct. Amid COVID-19, many of us have had to work at home and incur office expenses, such as printer ink or telephone service. These expenses are not tax-deductible if you are a W-2 employee. They are, however, deductible if you’re self-employed or own a business or own rental property.
3.Retirement savings. You can still donate to retirement plans. McLaren encourages people to save and set aside as much as you can. Over time, your contributions can really add up.
4.Find a good tax planner. The money they can save you will be well worth the cost.
5.Gather up your paperwork. If you want to save time and get a jump on 2021, start gathering up your tax documents, such as real estate taxes and mortgage interest paid as well excise taxes.
You still might find taxes frustrating or stressful. Maybe even boring. But by taking these steps, you can make them a whole lot easier in 2021.
For more information on McLaren & Associates CPAs, PC call 508.842.0459 or visit them online, and feel free to reach right out to Dave or a member of his team.