6 Smart Tax Moves to Make Before Year’s End
While the seasons change and the days grow shorter, you may be thinking about things like turkey, football, and Christmas trees, but, the end of the year is actually a great time to think about your taxes, too. If you play your cards right at year’s end, you can be good and ready when April 15th rolls around, and end up owing considerably less in Federal income taxes. Here are six things to do before December 31 that can put you on solid ground when it comes time to file your income taxes next April.
One out of every three Americans waits until the very last minute to file their income taxes. That inevitably leads to rummaging through folders and files looking for lost receipts and statements, and can cost you time, money and your health when you try to sort through your mess later on. Start right now getting all of your tax paperwork in order. Organize your receipts and account statements; you may want to start grouping your deductible receipts at this point to ensure you have enough to qualify for some deductions later on. Just do a little bit each day. Finally, make a spreadsheet to capture all of your major tax related information. All of this may seem tedious right now, but it will save you time and money next April.
Take a loss.
If you have stocks or mutual funds that have performed poorly and you do not intend to keep them for the long term, go ahead and sell them. The loss can help offset any taxable capital gains you have made, and can be balanced against your income to potentially shield you from a higher tax rate, too.
Max out your retirement account.
Take stock of how much you have contributed to your tax-deferred retirement account, and spend the last few months of the year working to provide the maximum allowable contributions. These contributions can be deducted against your taxable income and will help you when April 15th rolls around. If you do not yet have a retirement account, now is the time to get one.
Give to a charity.
It is the holiday season, and giving to a good cause is the right thing to do. Fortunately, charitable contributions are also tax deductible, too. This is also a good time of year to donate clothing, furniture and other household items that you no longer need, to get ready for the New Year. These donations are tax deductible as well. Ensure you keep your receipts after all of these donations, you will need them when you file your taxes.
Pay college tuition now.
Now is a great time to pay next semester’s college tuition, and if you do, you are likely eligible for some great tax breaks. Thanks to the American Opportunity Tax Credit, paying tuition early can make you eligible for a tax credit worth up to $2,500; even if you do not owe any taxes at all, you may still be eligible for up to $1,000 in refunds just for paying tuition early.
Get help from your home.
If you own a home, there are many ways that it can provide you tax advantages at year’s end. If you make your January 2017 house payment by December 31, you can deduct the interest from this year’s taxes. There are numerous energy efficiency improvements that, if installed prior to year’s end, can make you eligible for tax deductions or refunds as well. Finally, if you are self-employed and establish an office in your home to support your business by December 31, you will likely be eligible for a home office tax deduction when April 15 rolls around.