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How to Turn your Black Friday Savings into Tax Savings

Are you a Black Friday regular? Each year, retailers like Best Buy, Target, Amazon, and Sephora attract consumers to their Black Friday deals on everything from tech, beauty, gear, and clothing. 

And don’t forget Shop Small Saturday, Cyber Monday, and Giving Tuesday. Yep, the shopping extravaganza continues to expand, with deals ebbing and flowing throughout the whole month of November. Black Friday officially begins on the day after Thanksgiving, but some sales have started popping up already.

The average spend for 2023 is projected at around $708, and the savings clock in at an average of 24%. (Source: Finder) 

The way we see it, you have two choices here: 

  1. Shop smart, save, and funnel that extra cash into your retirement.

  2. Skip Black Friday altogether and put the whole lot into your future self. 

This post has you covered no matter what you decide. 

Smart Spending Tips for Black Friday

Before you run out and spend your hard-earned dollars on an enormous new TV, consider the behavioral economic factors at play behind the success of Black Friday. 

Retailers create artificial scarcity through limited inventory and time-sensitive offers, driving up consumer demand and willingness to spend. They may offer deep discounts on certain items (known as loss-leaders) in the hopes that customers will also buy other, more profitable items while they're in the store. Finally, the network effect does its part to reinforce the hype and draw more people in. 

With this in mind, we’ve put together some tips to help you keep spending in check and milk the sales for all they’re worth. 

Prepare Your Wishlist (and Budget) Beforehand 

The key to doing Black Friday right is to have a shopping list and spending plan prepared beforehand. If you do all of your holiday shopping in one fell swoop or score a great deal on something you needed anyway, Black Friday can be emotionally and financially satisfying. 

So, make your lists for Santa now, and write down any big items you’ve been eyeing. Going in prepared means you’ll be less likely to get caught up in the “thrill of the deal” and splurge on stuff you don’t really need.

Verify Whether It’s Really a Bargain 

Some stores use psychology to “trick” you into thinking you’re getting a steal—but marking something at 50% off doesn't help if it was overpriced to begin with. 

Check other stores to see if another shop is selling it cheaper. You can also use tools like Keepa or Honey to track Amazon pricing history.

Avoid Buy Now, Pay Later Deals 

You’re probably already aware that Buy Now, Pay Later (BNPL), the 21st century’s answer to  “layaway”, is a bad deal. The main reasons for this are: 

  • It encourages you to spend more than you actually can afford
  • The item often ends up costing more in total 
  • Missed payments may trigger late fees and interest payments
  • When 0% financing ends, you may be stuck with sky-high interest rates
  • Returns can be difficult 

If you do use BNPL, use it wisely, making sure you pay off within the 0% period, avoid any bank overdrafts, and carefully calculate the total cost of the item. And if you can afford to, avoid it altogether.

Ignore Urgency and Pressure Tactics

Don’t be swayed by a countdown clock or an “only one left in stock” notification. Sellers may use these and other manipulative marketing tactics to pressure buyers to act sooner rather than later. They play on your sense of FOMO (fear of missing out) to tempt you into making a purchase you might not have made otherwise.

Another classic move is to toss in an irrelevant add-on or upsell—looking at you, phone and cable companies—to make the deal seem sweeter, when really it’s just driving up the price.  

Write off Business Purchases

If you’re one of the 27 million Americans who are self-employed or running a small business, you can take advantage of Black Friday sales to reduce your tax bill.

For example, if you know you’ll need to purchase office supplies or a new computer in the coming year, you can purchase them during Black Friday sales and then write off the cost. This includes things like:

  • Portable hard drives
  • Headphones
  • Charging cables and ethernet cables
  • Phone you use for business
  • Microphones
  • Speakers
  • Software and subscriptions
  • Office supplies 
  • Office kitchen appliances
  • Company car  

Of course, you should only buy the stuff you actually need and can justify as a business expense. 

Shop Online to Save on Sales Tax 

If you live in a state that charges sales tax, you can avoid paying sales tax by shopping online (most of the best Black Friday deals are online these days, anyway). This strategy makes the most sense for larger purchases like a computer or other big-ticket electronics. 

Turn Your Black Friday Savings Into Tax Savings

You might decide to forgo the whole thing and invest in yourself instead. Or, you can calculate the extra money you saved and put it toward your retirement savings (hint, hint). Either way, here are some smart buys that you definitely won’t regret later. 

Top Off Your IRA Contributions

For 2023, you can make a combined annual contribution (for both traditional and Roth IRA) of up to $6,500. As one of the easiest tax-friendly retirement accounts to manage, we definitely recommend having an IRA in your portfolio and contributing the maximum amount each year. 

Max Out Your 401(k)

If your employer offers a 401(k) plan, you should contribute as much as you can each year. Many employers offer matching contributions, which can help you save even more for retirement. For 2023, the contribution limit for a 401(k) is $22,500 and is expected to rise to $23,000 in 2024.

Take Advantage of Catch-up Contributions

If you're 50 or older, you may be eligible to make additional contributions to your retirement accounts. For retirement savers 50 and over, the annual contribution limit rises to: 

  • $30,000 for 401(k)s

  • $7,500  for IRAs 

Don’t miss out on this valuable chance to make up for lost time and boost your savings.

Fund a 529 Account

You’ve probably heard of a 529 college savings plan as a tax-advantaged way to fund your child or grandchild’s college education. Well, did you know you can now move unused 529 funds to an IRA? This opens up a lot of future opportunities for you and for your offspring. 

Learn more about the tax benefits of 529 plans, and how converting unused balances to a Roth IRA helps you build a bigger nest egg. 

Open a Custodial IRA for Your Kids or Grandkids 

A custodial IRA is basically a Roth IRA for minors. All the same tax benefits apply, but since the person is under 18, the account must be opened in an adult’s name. As the account custodian, you’ll be in charge and make all the investment decisions. Once your child turns 18, you can turn control over to them.

One major caveat is that the contributions can’t exceed the child’s earned income. Learn the rules and regulations surrounding custodial IRAs here

Whatever you decide to do this Black Friday, keep your eye on the long game. The choices you make now will affect your future retirement. 

Ready to take control of your taxes? Download our free guide with ten essential tax tips to maximize your financial future. 

Disclosure: For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based upon third-party data which may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Indices are unmanaged baskets of securities and are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading. Information from sources deemed reliable, but its accuracy cannot be guaranteed. Performance is historical and does not guarantee future results. Total return includes reinvestment of dividends and capital gains. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article. By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements, or representations whatsoever by us regarding third-party websites. Wealth Legacy Institute is not responsible for the content, availability, or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products, or services available on or through these third-party websites. The opinions expressed by featured authors are their own and may not accurately reflect those of Wealth Legacy Institute®.

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