Personal Finance

The top 5 considerations after you've filed your tax return.

New York Life | May 8, 2020

20-310-tax

So, you’ve filed your tax return, met the deadline and you’re done. While it’s tax season, why not take time for a financial health check to make sure your finances are in top condition?

Meeting your tax deadline can be a huge relief, but while your head’s still in finance mode, it can be a good time to review your financial health and any plans. Think of it like your annual medical exam – but substitute your tax accountant or financial planner for your MD.

Here are our top 5 things to consider once you’ve filed your tax return:

1. To refund or not refund?

While tax reforms have steadily lowered the amount paid in refunds in recent years, the average refund is nearly $3,080.1 You can choose to accept any refund by check or bank deposit and spend or save some or all of it. Alternatively, you can opt to have it applied to next year’s income tax. Your choice will depend on your individual circumstances or future plans, but you may want to consider whether your income tax liability is likely to increase, or whether your spending or saving plans are tax efficient.

2. The impact of your tax situation on your day-to-day cashflow

Preparing your tax return can be a real eye-opener. You can see exactly how your current tax liabilities affect your overall finances. It can be a great incentive to sit down with your tax accountant or financial planner to consider ways to help minimize your tax liability in future years.

3. Maximizing investment-related deductions

Considering options to reduce your tax liability with your tax accountant or financial planner may include looking at maximizing deductions. For example, investing in your own future through a 401k plan can help you build a nest egg for retirement while also reducing your tax liability. The IRS increased contribution limits in 2023, allowing employees to defer up to $22,500 into workplace plans.2 Catch-up deposits for savers over the age of 50 have increased to $7,500. Investing in your loved ones’ futures is also tax deductible through a 529 plan for college expenses. IRS rules permit generous contributions, and withdrawals for education expenses are tax free.

4. Tax deductions on a house purchase

If you’re thinking of buying a home, there are a number of tax deductions you might want to consider. These include mortgage interest, property taxes and private mortgage insurance. Home improvements that boost the energy efficiency of your home may also allow you to claim tax credits.

5. Tax credits and deductions for business owners

Being a business owner brings added tax responsibilities. For instance, you’re expected to file a return even if your income is below the usual threshold. You’ll also be liable for self-employment tax alongside income tax, plus income is taxable whether you take it out of or reinvest it in the business. Working with your tax accountant can help you identify tax deductions or credits available to you and steps you can take to reduce your tax liability in the future.

Neither New York Life Insurance Company nor its agents provide tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.

1 https://www.cnbc.com/select/average-tax-refund-2023/#:~:text=As%20of%20Feb.,which%20clocked%20in%20at%20%243%2C473

2https://www.cnbc.com/2022/10/21/investors-can-contribute-up-to-22500-in-a-401k-and-6500-in-iras-in-2023.html

 

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Media contact

Kevin Maher
New York Life Insurance Company
(212) 576-7937
Kevin_B_Maher@newyorklife.com