While there are a plethora of legitimate ways to lower your bill when following the tax code – as an individual, business owner or parent – if you don’t work with a tax professional to help you stay on top of things, you can easily get caught out by any, or all, of the following:
Capital losses
If you’ve incurred capital losses, such as from selling investments, you can use these to offset capital gains. But it’s important to note that if the losses exceed the gains, you are only permitted to deduct $3,000 of the excess each year on your tax return. While remaining losses are carried forward, this isn’t particularly helpful if you’re hoping to offset the year’s income with a big deduction. While accounting in Miami can guide you, being aware of this from the get-go can help your bottom line avoid taking too much of a hit.
As an example, let’s say you lost $5,000 and weren’t able to sell anything at a profit to balance the loss out, you would only be permitted to deduct $3,000 in 2025; the remaining would be rolled forward to the future, further delaying your tax benefit.
The Home Office Tax
There are some valuable tax deductions to be had by working from home, but if you’re planning to sell the property, it can create some unwelcome complications. For instance, if you have a detached office and it makes up 5% of the property’s square footage total, you could be left paying taxes on 5% of the profit from the sale.
Moving the office into the main body of your property in the same year that you sell it, could help you avoid this problem, but guidance from a professional should always be sought.
Kids!
As your kids grow older, the size of your tax refund will inevitably shrink as some key credits begin to phase out. Let’s look at the Child Tax Credit as an example: for children under the age of 17, parents can receive up to $2,000 for each qualifying child, but as soon as they turn 17, the credit stops. Ultimately, you’ll either get a bigger bill when it’s time to file, or you’ll get a smaller refund.
If you’re not prepared for this change, filing season can hit some families hard.
Use of last year’s tax plan
While using your tax return from the previous year to help you plan for the current year might seem like a straightforward and effective strategy, even the smallest of alterations to deductions, income, or even tax law, could render your strategy for the previous year, useless.
Cutting corners in this way may work sometimes, but the chances are that you could miss out on tax savings by not properly reviewing your tax circumstances each year. The simplest way to avoid the headache of tax planning and filing, is by working with Coral Gables accountants, who are always up-to-date with the tax code, and can help you avoid any unpleasant surprises.
Don’t let unexpected taxes dent your bottom line, instead, take a proactive tax-approach and schedule a consultation with an expert well in advance of tax season.