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Year-end tax planning tips to help maximize your tax return

Take advantage of end of year tax strategies that may help put money back in your pocket.

Consider year-end financial moves that may help reduce your income tax liability when you file next spring. Start with these tax planning tips:

Donate to qualified charities and organizations

You can generally deduct contributions of up to 50% of your adjusted gross income to qualified charities and organizations if they're made before December 31. Consider the following:

  • Donate stock – You can generally deduct the fair market value of donated stock.
  • Use a community foundation – You direct the money, and the foundation pays it out over a period of years. You can generally deduct the donation the year you paid the foundation.

Contribute to your 401k

Add pre-tax money to your 401k before the end of the year to reduce your taxable income.

Sell losing stock

Sell losing stock before year's end to deduct the capital losses against any capital gains you realized, and reduce your taxes on the money you earned from successful stock. Once you offset your capital gains, you, as an individual, can generally use any excess losses to reduce ordinary income up to an annual limit of $3,000.

Focus on long-term capital gains

Assets that you hold longer than a year before selling is a long-term capital gain. While short-term capital gains are taxed like your regular income, long-term capital gains are taxed based on graduated thresholds for taxable income. Tax payers that report long-term capital gains see tax rates of 15% or lower. Use the time now to evaluate your financial portfolio and shift more funds to investments that offer longer-term tax savings. Visit the IRS for additional information on capital gains and losses.

Fund education

Provide a family member with the gift of education. Consider a contribution to a 529 plan as many states allow residents a deduction for contributions.

Spend your FSA

You may have money left in your Flex Spending Account (FSA). Consider using these funds by getting caught up on your doctor's visits, getting a cleaning at the dentist or a new pair of eyeglasses. Per the FSA carryover rule, up to $610 can be carried over at the end of the year to your 2023 FSA account. If you don’t use it, you can lose it. Keep in mind, you’ll pay taxes on any funds still in the account on December 31st.

Gather receipts related to property taxes or large purchases

If you pay property taxes on your home, state taxes or paid sales tax for a large purchase, you can deduct up to $10,000 ($5,000 if married and filing separately).

Start your end of year tax planning today. Consult a tax professional if you have any questions and to help make the most of your tax filing.

Neither State Farm nor its agents provide tax or legal advice.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

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