It may seem strange to think about taxes now, when our minds are focused on savoring the waning days of summer, but the end of the year will soon be here, and tax season will quickly follow. There are steps that you can start taking now to ease the stress - and limit any surprises - when tax time rolls around.
Assess your debt: Many Americans have more in debt than they do in savings. Take steps to consolidate your debt where possible at a lower rate, and pay it off as quickly as possible. Make it your goal to live debt-free.
Donations: If you have donated items to charity or made monetary gifts, make sure you collect and save receipts so you can deduct those contributions from the amount you owe in taxes.
Increase your 401K: 401K contributions are tax deductible and increasing your contribution rate can lower your tax bill. If you have not started contributing to your 401K, start now. It is never too late, but the earlier in the year that you start, the better.
Increase your savings: Focus on boosting your savings during the last half of the year. It is recommended that you have three months’ worth of expenses saved up in case of an emergency. Do not let an unexpected medical expense or a big tax bill derail your financial stability. Check out our customizable savings tips at MySmartMoney.
Estimate your taxes: Will you owe money or get money back? Have you calculated your withholdings correctly at work? Now is the time to double check. If you are self-employed, have you paid your quarterly estimated taxes? If you anticipate a tax bill, start setting money aside to pay it.
It’s always a good idea to take stock of your financial house periodically. While tax season is still months away, you can avoid being surprised with a big tax bill by taking steps now to ensure your financial situation is on track.