5 Tax Planning Checks that Could Save Thousands!
Now that tax time is here, you’re probably starting to load everything into your tax preparation software or send documents to your CPA. There are many tax documents mailed to you or available online, but what about some of the items that are tougher to keep track of? Here are five tax strategies that are often missed or not reported:
1. 529 Contributions/Distributions
Other than your year-end statement, you may not receive something specific to send to your accountant that outlines the amount you put into 529 plans during 2021. Be sure to track this information down and pass it along to your accountant to confirm you receive the appropriate deduction on your state income tax return.
2. Qualified Charitable Distributions
If you are 70 ½ or older, you may have contributed to a qualified charity directly from your IRA, which is crucial information for your CPA to have! Custodians do not track where IRA distributions go, so your 1099-R tax form will likely show the total distribution as “taxable.” If you do not let your CPA know part of this went to charity, you may be taxed on the total distribution.
3. Charitable Contributions
If you made gifts of cash, appreciated securities, or other property to qualified charitable organizations during the year, you will likely receive a letter from the organization documenting your gift. Be sure to pass this information along to your CPA, as these donations are not captured on an IRS form.
4. IRA Contribution Deduction
You have until April 18, 2022, to contribute to your IRA for the 2021 tax year. In certain cases, you may qualify for this contribution to be tax-deductible. If you – and your spouse, if married – are not covered by an employer-sponsored retirement plan, you can deduct the full contribution to your traditional IRA no matter how much you earn. However, the maximum you can deduct per person is $6,000 for 2021, and individuals 50 and older can put in an additional $1,000 as a “catch up” contribution.
5. Health Savings Account (HSA) Contribution Deduction
Similar to the IRA deduction noted above, you have until April 18, 2022, to make a deductible contribution to your Health Savings Account (HSA) for the 2021 tax year. However, being able to contribute first requires that your health plan be HSA-qualified. Like the IRA contribution noted above, be sure to confirm with your HSA custodian that any contributions you make post-year-end that you want on your 2021 tax return are coded as a “prior year” contribution.
Hopefully, the above information helps you send the appropriate documentation to your CPA and provides you with a few options to maximize your tax savings for the 2021 tax year.
No representation is being made that any strategy shown will or is likely to achieve results similar to those shown in this presentation. BDF does not provide legal, tax, insurance, social security, or accounting advice. Clients of BDF should obtain their own independent tax, insurance, and legal advice based on their particular circumstances. The information herein is provided solely to educate on a variety of topics, including wealth planning, tax considerations, insurance, estate, gift, and philanthropic planning.
Josh focuses on provided Advanced Planning solutions for unique and complex situations. He sits on the firm’s Financial Planning Committee, responsible for educating the BDF team to ensure each client benefits from customized proactive advice. He studied at Aurora University, earning degrees in Accounting and Business & Commerce. Josh is a CERTIFIED FINANCIAL PLANNER™ professional.
Neil heads BDF’s Financial Planning Committee whose goal is to ensure BDF provides a best in class, proactive, and engaging financial planning experience for clients. His passion is helping executives, widows and retirees live their full lives while navigating their wealth planning complexities. Neil has his Masters in Financial planning and has frequently been named to both Forbes and Chicago Crain’s list of Top Wealth Advisors.