Fall Tax Planning: 7 Things to Do Before the End of the YearNashua, NH Resident Looks to Make Adjustments to His Taxes

Fall is a great time to start thinking about your taxes. While the April tax deadline may still seem far away, waiting until tax season to review your finances can mean missing opportunities to reduce your tax bill, maximize deductions, or avoid an unexpected balance due. A little planning before December 31 can make tax season much easier. Here are seven things to consider before the year comes to an end.

A Nashua resident was proactively looking to make adjustments to his taxes before the end of the year. Doing this type of fall tax planning, will save him plenty of headaches down the road.

1. Review Your Tax Withholding

Take a look at your current income and the amount of federal and state taxes being withheld from your paycheck. If your income has changed significantly this year because of a new job, raise, bonus, second job, or other source of income, your withholding may no longer be appropriate. A fall review gives you time to make adjustments before the end of the year.

2. Maximize Retirement Contributions

Fall is a good time to review how much you have contributed to your retirement accounts so far this year. Depending on the type of retirement plan you have, increasing your contributions may provide valuable tax benefits. Check your current contributions and remaining room before the end of the year. If you receive a year-end bonus, you may also want to consider whether putting some of that money toward retirement makes sense for your overall financial and tax situation.

3. Review Your Flexible Spending and Other Benefits

If you have a flexible spending account (FSA), check your balance and understand your employer’s rules regarding unused funds. Some plans have deadlines for spending this money, while others may allow limited carryover or additional time. 

4. Gather Important Tax Documents

Don’t wait until March or April to start looking for tax documents. Begin organizing records now, including receipts, charitable donation records, mortgage information, investment statements, medical expenses, and other documents that may be relevant to your return. If you are self-employed or have a side business, make sure your income and expenses are being tracked accurately. Keeping organized records throughout the year can make preparing your tax return significantly easier.

5. Review Charitable Contributions

If you regularly make charitable donations, consider reviewing your contributions before December 31. Keep receipts and other documentation for qualifying donations, and remember that tax rules regarding charitable contributions can be specific. Depending on your circumstances, donating appreciated investments or other assets may have different tax consequences than donating cash.

6. Look at Investment Gains and Losses

If you have investments in a taxable account, fall is a good time to review your portfolio and consider whether you have realized or unrealized gains and losses. Investment gains can affect your tax liability, while certain investment losses may be used to offset capital gains, subject to applicable tax rules. Because investment transactions can have complicated tax consequences, it’s worth discussing potential year-end moves with a tax professional before selling investments simply to generate a tax benefit.

7. Schedule a Tax Planning Appointment

Perhaps the most important step is to talk with your tax professional before the end of the year. Your tax situation can change significantly from one year to the next. A marriage, divorce, new child, home purchase, retirement, job change, business venture, investment sale, or other major financial event may affect your tax liability. Meeting in the fall gives your accountant time to review your situation and identify potential tax-planning opportunities while there is still time to act.

Tax planning isn’t just something to think about after the calendar turns to January. Taking a proactive approach in the fall can help you make informed financial decisions before December 31 and potentially avoid surprises when you file your return.

With the help of Merrimack Tax Associates, the Nashua resident was able to make some small changes to his finances that will pay off big in the long run.