Let’s all breathe a collective sigh of relief now that this year’s tax return has been filed. But now that this year’s filing is done, what might you have done differently?

One typical error that people make is not thinking about their taxes until it is time to file. However, by planning ahead and making some financial changes now, you’ll be better prepared to save time and money when submitting your tax return next year.

Here are some tax season preparation tips and strategies to help you save money on next year’s taxes.

1. Revisit your Form W-4.

 Not satisfied with your tax bill or refund this year? Adjusting your W-4 is an effective way to guarantee you have control over how much tax is withheld from your earnings.

If you began a new job during the last four years, you may have noticed that the W-4 form appeared slightly different. Beginning in 2020, the IRS streamlined the W-4 form to enhance employee withholding accuracy and get you closer to “breaking even” on taxes. Ideally, this means that your tax refund or amount owed after filing will be as close to zero dollars as possible.

However, with your W-4 you can still make the choice of whether you want more money in your refund or more money in your paycheck.

2. Maximize your retirement contributions and other employee benefits.

Try to maximize any tax-deferred retirement account, such as an IRA or an employer-sponsored 401(k). Just make sure that you do not exceed the contribution restrictions, which might result in significant tax penalties. And if your employer offers a contribution match for a percentage of your 401(k) payments, don’t pass up the opportunity!

It’s also a good idea to take advantage of the health savings accounts (HSAs) and flex spending accounts provided by many employers. HSAs and flex plans enable you to save tax-deferred or tax-free funds for eligible costs such as medical care (or childcare).

Like retirement accounts, these plans have maximum contribution restrictions. For tax year 2024, taxpayers may contribute up to $3,200 to a flex spending account or $4,150 to an individual HSA ($8,300 for a family HSA).

3. Lose stocks that aren’t working for you.

Are there any stocks that are pulling down your investment portfolio? Think about disposing of them this year and utilizing the losses to offset any realized gains or lower your taxable income for the next year. This method is known as tax-loss harvesting.

You can deduct up to $3,000 in realized losses each year (or $1,500 each for married couples filing separately). If your losses exceed the yearly limit, you can roll the excess over to the next tax year.

Keep in mind that you cannot sell a stock to deduct a loss and then immediately buy it again. This is known as a wash sale, and the IRS will not allow you to deduct the loss for tax purposes if you repurchase the stock (or a “substantially identical” investment) within 30 days.

4. Turn your hobby into a side hustle.

The gig economy is expanding, and being a part of it comes with significant tax advantages. Whatever your interest is, turning it into a business might provide you with tax benefits such as the home office deduction. You’ll also be able to deduct the cost of any supplies, as well as a part of your utility and internet expenses.

5. Plan your purchases ahead of time.

You may increase the amount of tax breaks you are eligible for by making any tax-deductible purchases before the end of the year. Once January 1 arrives, you will have to wait until the next year to gain any tax benefits.

For example, if you know you need a costly medical operation, try to arrange it before December 31 so you may claim it as an unreimbursed medical expense on your taxes. If you’re a homeowner and an itemizer, you could make an extra mortgage payment to boost your mortgage interest write-off for next year. If you own a small business or are self-employed, make any major purchases before December 31 to deduct the expenditures on your tax return.

6. Save on child and dependent care.

If you have a child under 13 years old and employ someone to care for them while you work or seek employment, you may be eligible for the child and dependent care tax credit. This tax advantage is determined based on your adjusted gross income and allows you to deduct a particular percentage of eligible childcare costs.

7. Use PSA CPA as your tax professional.

 If you’re intimidated by tax preparation, don’t be! Your partners at PSA CPA are here to help. Contact us anytime to set up a consultation.