It is that lovely time of year when we get to meet our maker. Tax maker that is! If you are like me, you love paying taxes, the more the merrier as a matter of fact. That said, I figured a full blog on how to pay more taxes wouldn’t play so well. Instead, I’ll focus this one on 3 easy last-minute tax tips you can utilize for your 2021 tax season.
Now, I’ll preface this by saying my biggest tax tip is utilizing a tax professional who can stay on top of all these strategies for you. I have to admit I can’t take full credit for all these strategies, rather I lean on our tax team at Diversified Tax to help guide us and our clients to take advantage of the latest tax trends. If you haven’t spoken with them yet, I highly suggest it as they are a great group of individuals and will help provide that integrated experience we want you to have.
O.K. enough shameless plug – let’s get into a few last-minute moves you can make.
3 Last-Minute Tax Tips:
Remote work 2021
This one is rather specific as the other day Delaware Division of Revenue issued guidance on how to report days worked at home. This is only relevant if:
A. You work in DE,
B. You live in another state say, Pennsylvania and,
C. Your employer made you work from home, or highly encouraged you to work from home.
If you fit these criteria you are going to want to instruct your CPA to report days worked from home as days worked outside of Delaware of Schedule W. It is important to note this is only relevant as long as your employer-mandated work from home status. The big win here is for those days you’ll pay lower state income tax. If you are like me that is a 2-3% savings on every $100,000 of income! This isn’t to suggest other states won’t follow suit, so I highly suggest consulting your tax professional to freshen up on your state’s laws.
IRA & Roth IRA contributions
You have until 4/15/22 to make an IRA or Roth IRA contribution for 2021. If you are eligible you can still contribute the maximum allowable for you and/or your spouse for 2021. There are a lot of loopholes and pitfalls here so I highly suggest consulting with your tax and financial professional.
That said – a great strategy for higher-income earners is to make a non-deductible IRA contribution for you and/or your spouse. From there you convert these funds into a Roth IRA effectively making a Roth IRA contribution for you both. The limits for 2021 are $6,000 if under 50 and additional $1,000 catch-up if 50 or older.
If you’ve read any of my blogs over the years you know I am a huge H.S.A (Health Savings Account) advocate. They are literally the best vehicles out there as they allow triple tax treatment. The funds go in tax-deferred, grow tax-free, and come out tax-free. They are like the Superman of tax shelters; except they have no kryptonite.
So, what’s the tax strategy? Well, similar to the IRA strategy you have until the tax filing deadline on 4/15/22 to make a retroactive contribution to your Health Savings Account for 2021. The limits here are $3,600 for an individual and $7,200 for a family. Additionally, there is a $1,000 catch-up if you have attained the age of 55. If you haven’t already maxed out your 2021 H.S.A plan may I suggest you run, not walk to do it right now!
Cos I’m the Taxman
“If you drive a car, I’ll tax the street”
“If you try to sit, I’ll tax your seat”
“If you get too cold I’ll tax the heat”
“If you take a walk, I’ll tax your feet”
“Cos I’m the taxman, yeah I’m the taxman”
Oh John, Paul, George, and Ringo how I love thee. They have such a way with words and can so eloquently string them together in 2:30 minutes to make music magic. As they suggest in their ode to taxes they too disdain taxes (and to refute my previous statement I actually don’t like paying taxes). There isn’t a lot of time left to implement these tactics before you file your 2021 taxes. That said, I hope you found it helpful, and again if you need help, I highly recommend our great team led by Ed Lynch at Diversified Tax to help with all your tax needs.
As always stay wealthy, healthy, and happy.
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