End-of-Year Tax Suggestions to Save Money
Most people would dislike having to think about their taxes during the holidays — their favorite part of the year. Yet, if you put it off until January or February, you’ll end up missing out on a chance to make significant savings.
If you want to see a lower tax bill in April, you need to take some action before Christmas. The following are a few tips that will work for most people. For tips that are customized to your personal situation, a professional licensed tax preparer should be an excellent idea.
Look at your tax withholdings
Find out exactly how much you’ve made this past year by checking pay stubs, investment statements and anything else that you may have. Then, compare the figure you arrive at to what you made in the last tax year (as stated in your tax return). If you’ve made more this year, it would be a good idea to increase what your employer withholds for your taxes. If you aren’t having enough withheld, you will be faced with a huge tax bill, come April.
Find things to donate
Look through your cupboards, closets and basement to find things that you aren’t using. If they are in good condition and would be useful to someone, you should call a charity, set up a pick-up and donate it. Your donations could amount to a useful tax deduction.
Lower your gross income
If you are buying your own health insurance through an Obamacare exchange, you should know that all subsidies under the Affordable Care Act are based on your Adjusted Gross Income. Lowering your AGI will net you a bigger subsidy.
One way would be to ask your employer to not give you your bonus now. If you have it given to you in January, you’ll be able to keep your AGI down for this year, and net a bigger subsidy. If you have your own business, you can mark the invoices you send out as due in January.
Pay your property taxes early
If you have property taxes or state income taxes to pay, paying them before January is a good idea. You can deduct both out of your federal income tax.
Get rid of nonperforming investments
If you’re paying capital gains tax, you should consider selling all unprofitable investments. Whatever losses you make, they can offset your capital gains and lower your taxes. If your nonperforming investments are doing so poorly that your losses exceed any gains, you can write them off. The IRS allows you to deduct as much is $3,000 from your income for investment-related losses.