Three things to do before the end of the year
As the year end is approaching, we all think of holidays, presents, and time with our families. We should also be thinking about the activities that we have to do before the end of the calendar year, both as individuals and business owners. Certain steps that we can take may help us lower our taxes, avoid penalties, and put us in an improved financial position.
- Make charitable contributions - these help reduce income tax liability, especially if you itemize your deductions already. Besides tax deductions, certain contributions in Arizona result in an actual dollar-for-dollar state tax credit. You need to know the amount of taxes payable for the year, so that you maximize the donations without overpaying.
- Pay mortgage, property taxes early, or buy needed equipment - all of these will help reduce taxes for the year. You will be able to claim a deduction for buying a computer even if you only had it for one day in the year. Making a mortgage payment a few days early, before the new year, will help you claim a greater tax deduction (for the extra interest). Paying property taxes before the year-end will also count as a deduction. If you plan to do any property maintenance, doing it before the end of the year will help move tax deduction into the current year, instead of the next year.
- Review your investments - Rebalance your portfolio as needed. Consider selling investments that have lost value - this will offset some of the capital gains accrued during the year.
In order to take full advantage of the above suggestions, it is important to have a clear picture of your business and personal financial performance to date. Programs like QuickBooks (or Quicken) can provide the necessary information in simple reports, if the information in them has been kept up to date.
Armed with this financial information, you can take the necessary steps on time, allowing you to enjoy your holidays guilt-free!
Inna Korenzvit is Founder and Principal Accountant at KORE Accounting Solutions, a future-focused management accounting firm specializing in providing legal professionals and business owners with the data and insights they need to stay compliant and run more profitable firms.