ATLANTA - October is not always a time we think of saving on our taxes. But, there are some simple moves you can make now that'll save you come April.
If you owed taxes last year, this is a way to either eliminate that or to make it a little less painful come tax season. I talked to money management expert Lisa Brown of Brightworth who gladly passed along this great advice about how to avoid that panic in April when you are asked to cut that big check for the government.
"What we typically find is that people start saving taxes in December. But by that time of the year, it's often too late to make an impact," said Lisa Brown.
She's right. If you wait until December, you won't feel the benefit until a year down the road. So, here are three things you can do now to reduce or eliminate what you will owe the government come April for your 2017 tax return.
Money Moves to Make in 2017
- Increase Taxes Withheld from Your Pay Check
- Increase 401(k) Contribution
- Top Off Your HSA
First, if you owed money last year, you didn't have enough taken out of your check during the year. If you're not looking for a repeat, submit a W-4 Form to your employer and have more taken out of your check now. If you want to change it back right after the new year, do it.
OK, number two. Increase your 401(k) contribution. Again, saving now means less of your money is subject to being taxed in April. If you wait until December, it's too late because it takes as many as two pay periods to kick in.
Our third tip is to top off your HSA, your health savings account. Not all of us have one of these, but if you do, listen up. And if you haven't considered an HSA, listen to this...
"There's no other saving vehicle out there that allows you to save taxes going in, pay no taxes while the money is in there, and get it out tax-free on the back end," said Ms. Brown.
A health savings account is a little bit like your 401(k). It's an investment plan where you can use your money made to pay for medical expenses. Often times people with high deductible medical plans use this. You can make tax-free contributions through mid-April, but Ms. Brown says doing it by the end of the year makes it cleaner from a tax prep point of view.
Here's how an HSA is different from the more familiar flexible savings account, or FSA. You have to use all of your money by year's end in the FSA. Use it or lose it, as they say. In an HSA you can roll over that money from year to year. In fact, you can let it accumulate for years or decades. The benefit of that is having quite a nest egg in your later years when our medical expenses start to get costly.