Election can help us focus on our taxes
Now that we have reached November, the attention of many is turning (even more) to the upcoming presidential election. And a great deal of the rhetoric surrounding that situation is turning people’s attention to tax talk.
As someone who works in the tax industry, it is always surprising to me when events cause this to occur. Taxes clearly interest me more than they do most people, and I find that many people, including some of my clients, do not like talking about their tax situation. I understand this, as no one likes to fully face watching money they earned going to other people.
I suppose that is the reason why the Trump/Clinton tax plans are getting so much attention. Picking a side gives us the chance to have some voice in how we want taxes to affect our paychecks. I believe everyone would do well, however, to remember that whoever wins the election cannot single-handedly determine tax policy and institute immediate sweeping changes.
This does not mean that you cannot take control of your tax situation, though. What you do yourself with your own finances will have a much greater effect
on your bottom line than whoever next takes up residence in the White House (especially seeing as their moving day doesn’t come until 2017).
The time left in 2016 is dwindling, though, so if you want to make changes, now is the time. Again, I know these are issues that few enjoy talking about, but by doing so, you can make
some changes to what your tax return will look like when it is filled out early next year. So here are some things worth thinking about before tax season really begins.
First, has your income experienced any significant changes in the past year? If things there are moving in the positive direction for you, congratulations. You just also will want to ensure that you are withholding enough in taxes at the same time, however, to keep from facing a surprisingly
large tax bill when you file next year.
It is possible that you are making less money, too, which means that your tax burden is also decreasing. It is possible that you have already withheld enough to cover your responsibilities for the year and changing your withholding over these last few weeks of 2016 could be like giving yourself a small raise.
There may be no better time of year to take home a little extra, as the holiday season approaches. We are
not all in the blessed position to receive one, but it is also a good time for everyone to think about making a charitable donation. You will feel good about doing it (and there is research that says donating money is one of the best things to do with your funds to increase your own happiness) and get the bonus of a potential tax deduction. You can even give yourself some money in ways that ease your tax situation. Most people have until the end of the year to add to 401(k) plans and
there are contributions that can be made to IRAs until April 15 that will still affect your tax bottom line.
If, on the other hand, you have withdrawn money from a retirement account, you will want to be sure that you have taken into account how that transaction affects your tax picture. Other big events that may also have an effect include taking any capital gains or losses, purchasing real estate and starting or selling a business.
This is a lot to think of
at once and the answers are never obvious or easy. Hiding from them will not help, though. Facing the situation gives you the power to make positive changes. Keep that in mind and if there’s something you don’t understand, reach out to a tax professional.