When filing your taxes, you may be wondering how a successful tax plan can help you achieve your financial goals, whether you’re filing taxes for the first time as a young professional or approaching retirement.
During tax season, put this aspect of your financial plan front and center by working with a certified financial planner. Here are three ways a CFP professional can help you make the most of tax deductions, tax credits, and tax-advantaged accounts:
1. Avoid surprises: A tax refund may seem like a blessing, but it means you’ve given the government an interest-free loan. However, you don’t want to overdo it in the other direction and end up with an unmanageable tax bill. A CFP professional can help you adjust your tax estimates or withholdings so that you have a better chance of breaking even at the end of next year. And if you end up with a refund, they can help you redirect that money in a way that benefits your overall financial plan.
2. Plan for the future: Maximum employee deferrals for defined contribution plans, such as 401(k)s and 403(b)s, have increased significantly. A CFP professional can help you determine how much you can comfortably contribute each month to shield more of your wealth from taxes. This measure has an added benefit if you’re near the edge of a higher tax bracket — by reducing your taxable income, you may fall into a lower bracket and save. And, of course, by increasing deferrals, you’ll be preparing for a more comfortable retirement.
3. Become a strategic donor: When filing your taxes each year, you may have noticed that there’s a high requirement to claim deductions for charitable donations. In fact, for 2023, the standard deduction is $13,850 for single filers and $27,700 for married couples filing jointly. To make the most of your charitable dollars, a CFP professional can help you establish a donor-advised fund. This allows you to “bunch” your donations and qualify for deductions immediately. This tax-advantaged donation method is good for you and good for the end recipients, as it allows your contributions to potentially grow while you decide which charities to support.
CFP professionals are aware of the latest changes in the tax code that the average investor often doesn’t know. To find a CFP professional committed to acting in your best interest during tax season.
Taxes can be one of the most complicated aspects of financial planning. With the help of a financial advisor, you can avoid surprises, save more of your hard-earned money, and be well-positioned to achieve your goals.
Source: StatePoint