With Thanksgiving behind us, thoughts turn to the upcoming holiday season. But for those of you like me, you are thinking already about the New Year. Just a little bit of tax planning now can make such a difference in your tax bill come April. Here are some easy ways to minimize taxes in the months to come.
Clean out your closet for the Holidays
Take a full inventory of what’s in there and donate items you don’t recognize or rarely see to your favorite donation center. Not only will you get in the holiday spirit and gain a charitable tax deduction, you’ll have more room for this season’s fashions.
Maximize pre-tax retirement plan contributions
Review how much you are contributing and adjust it to the maximum. Your contributions directly reduce taxable income and can add “free money” to your plan if your employer matches.
Double up or make payments early for Itemized Deductions
Many a tax dollar can be saved this year by paying extra or even just a few days early certain expenses, including property taxes, state estimated taxes, and mortgage payments.
Group medical costs
Fortunately most of us don’t qualify for the medical expense deduction, which kicks in above 7.5% of our adjusted gross income. But if this is an expensive year for you medically speaking, try to lump in any other services you need as well. Plan expensive dental work including false teeth. Plan purchases of glasses, contact lenses, laser eye surgery, or even hearing aids.
Group job-hunting costs
These are deductible in excess of 2% of your adjusted gross income, as are moving costs when you relocate more than 50 miles away to take a new job.
Time the sale of investments
Consider your cost or basis in the stock before selling it for needed cash. A delay of even a few days into January can make your April completely different tax-wise.
Of course, you should always consider your unique situation in thinking about tax strategies. Early tax payments for example, might be wasted if you are subject to the Alternative Minimum Tax (AMT). If you need a little help, consider consulting with your tax preparer. You may be pleasantly surprised how affordable a quick review of your tax situation can be.
Tax Tips are not a substitute for legal, accounting, tax, investment or other professional advice. Always consult with your trusted accounting advisor before acting upon any Tax Tip.