As you file your taxes, you may be wondering how a successful tax plan can help you reach your financial goals, whether you’re filing taxes for the first time as a young professional or approaching retirement.
During tax time, put this aspect of your financial plan on the front burner by working with a certified financial planner. Here are three ways a CFP can help you make the most of tax deductions, tax credits and taxadvantaged accounts:
1. Avoid surprises: A tax refund may feel like a boon, but it means that you gave the government an interest-free loan. However, you don’t necessarily want to swing too far in the other direction and end up with an unmanageable tax bill. A CFP can help you adjust your tax estimates or withholdings, so you are more likely to break even next year-end. And if you do end up with a refund, they can help you redirect the money in a way that’s beneficial to your overall financial plan.
2. Plan for the future: The maximum employee deferrals to defined contribution plans such as 401(k)s and 403(b)s have risen considerably. A CFP can help you determine how much you can comfortably contribute each month to shelter more of your wealth from taxes. This move has an additional benefit if you’re close to the edge of a higher tax bracket — by trimming taxable income, you can fall into a lower bracket and save. And, of course, by boosting deferrals, you will be setting yourself up for a more comfortable retirement.
3. Become a strategic giver: As you file your taxes each year, you may have noticed that there’s a high bar for claiming deductions for charitable donations. In fact, for 2023, that standard deduction is $13,850 for single filers and $27,700 for married couples filing together. To make more of your charitable dollars, a CFP can help you establish a donoradvised fund. This allows you to “bunch” your donations and qualify for deductions immediately. This tax-advantageous method of giving is good for you, and good for your end recipients, as it allows your contributions to potentially grow while you decide which charities to support.
CFP know the latest tax code changes that average investors often do not. To find a CFP committed to acting in your best interest during tax time and beyond, visit LetsMakeAPlan.org.
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 hardearned money and be well-positioned to reach your goals.
