A Midsummer Tax Review
Here we are mid-July. The year is a little more than halfway behind us. I always suggest this midsummer time to take about an hour to review your finances and tax situation to prevent any surprises at the end of the year.
So many life circumstances can trigger a change in tax status. For instance getting a promotion with a pay increase, changing jobs or losing a job. In addition, getting married, getting a divorce or the death of a loved one can have an effect on your taxes. If you are sending a child off to college, there are financial considerations that should be made now that can give you a tax break. So let’s get started.
Job or Work Related Changes
If you searched for a new job, did you track your expenses related to the search? If you spent time looking for a job during the first half of the year and are now employed, some of your expenses during your job hunt could be tax deductible. The important thing to remember is that the search must have been for a job in your current occupation, not for something in a new field. And, if you traveled to a different part of the country for your search, some of the travel expenses might also be deductible. Likewise, employment and outplacement agency fees may be deducted if you search was for work in your field.
Any change in your job status still gives you enough time to make any necessary adjustments to your increase or decrease your withholding. If you still have not signed up for the company 401k plan, there’s time enough to do that too, if your employer has an enrollment period or will allow one at this time. With five full months remaining, you could make a contribution that could reduce the taxes you pay today. If you’re not in a company plan, there’s time to set up an Individual Retirement Account and work toward making the maximum contribution by yearend. The maximum contribution is $5,000 per year if you’re under 50 and $6,000 if you’re older. The good news with the IRA is that you can make contributions right up to the April 15 tax-filing deadline.
College Bound Children
If you have a child entering college and have been contributing to a 529 savings plan, now is the time to withdraw funds tax-free to buy a computer, computer accessories and to pay for Internet access if applicable for the 2015-16 school year. Some schools provide free wireless access.
One of the most time saving and important tasks you can tackle now is organizing the receipts and any other tax related documents you might have already received. These include proof of charitable contributions, marriage and/or death certificates.
So use these lazy hazy summer days to get a jumpstart on your taxes. It will feel really good when you get to the end of the year and realize you’ve gotten yourself organized and are ready for the taxman earlier than usual.