It’s December and the year will be ending before you know it. Don’t fret, there’s still time to take advantage of some tax saving tips to make your tax burden next April a little less.
Here are 9 year end tax savings tips:
Max Your 401(k)
If you can afford to take the paycheck hit now you can up the percentage of your 401(k) contribution. Your contributions are tax-free and will lower your taxable salary.
Open or Contribute to a Traditional IRA
For some a traditional IRA may be a better option than a Roth IRA. With a traditional IRA you get to deduct your contributions from your taxable income. Have have until April 15th to contribute.
Sell Losing Investments
The sold investment losses can be deducted to offset gains or to reduce your taxable income. The limit is $3000 though.
Donate to Charity
Donations before Dec. 31st can be deducted on next year’s return. You have to itemize your deductions to claim this. Bonus benefit: You might be helping some people out!
If you prepay some bills such as mortgage payments or medical bills you can write them off on next year’s return.
Second Chance Economic Stimulus Payments
Some who didn’t qualify for economic stimulus checks earlier in the year may qualify this time due to a life change (marriage, birth, change of income…).
Job Search Expenses
If you searched for a new job (in the same industry you’re in now) you can deduct expenses you incurred such as resume preparation, career counseling, travel, and phone calls.
Tax Relief for Foreclosures
Normally if your home was foreclosed or the mortgage was reduced or restructured you would have to pay taxes on the amount reduced. Recent legislation has made it so you may not have to pay taxes on the forgiven amount.
Use Up Flexible Spending Plans
You contribute to a flexible spending plan to save on taxes. But if you don’t use up the contribution amount then you lose the ability to claim it back. Make sure you claim the full amount before the deadline passes (check with your HR department to see when your company’s deadline to claim is).
Most people don’t like to pay taxes. You still have some time to take advantage to lower your tax burden.
Bonus Tip (because I thought of it after I first published):
Max out a 529 plan for your kids. Many state plans offer tax advantages for contributing! (check the specific plan for details).
These tips are in part courtesy of our friends at Intuit and TurboTax who were kind enough to provide them.