As the year winds down to a close and Holiday cheer is in the air, the last thing you
probably want to think about is your taxes. However, it’s a great time to implement last
minute tax strategies to maximize your deductions for this year and minimize your
upcoming taxes.
Use these strategies to save money on your taxes at the last minute:
1. Delay your income. Minimizing your income is one way that you can save
money when you file your taxes. You can achieve this by deferring or delaying
some of your income until the next year. Receiving this income in the first
week of January rather than the last week of December can pay off big!
● Do you have clients or 1099 income that you can delay or push
back until January 1st? If you can push back any of your hours or
invoices, try to do so.
2. Tax credits. Tax credits are similar to deductions, but they take money directly
off of your taxes owed or add directly to your refund rather than just deduct
money from your income. Tax credits can save you a significant amount of
money. Since tax credits change from year to year, do some research to see
which credits you qualify for.
● Some examples of tax credits include retirement savings credit,
adoption tax credit, credit for the elderly and disabled, child tax
credit, dependent care credit, HOPE credit, and lifetime learning
credit.
● Tax credits also exist based on the Energy Tax Incentives Act, and
include credits for solar energy equipment, energy-efficient
improvements to the home, and the purchase of hybrid vehicles
and other alternative energy vehicles.
● Tax credits all have unique qualification requirements and
purposes. HOPE credit and lifetime learning credits pertain to
education, for example. Many tax credits apply to adopting or
raising a child. It’s important to research which ones actually apply
to you.
3. Deductions. You can load up on deductible expenses in December to reduce
the taxable income for the year, especially if you have income from
self-employment or own a small business. Ensure that you include only legitimate
deductions, because the IRS is careful to scrutinize every one.
● Prepay your taxes, which will count as a federal deduction. If you
withheld your local or state taxes this year and you’re planning to
itemize your deductions, this will benefit you.
● Contribute as much as you can to your 401(k) or other
tax-deferred retirement plan and you’ll increase your savings
for retirement while cutting your taxes.
● Pay your January mortgage bill early to include additional mortgage
interest, which is a deductible expense.
4. Donate to charities. Take advantage of the holiday season, a true season of
giving, by donating to your favorite charity. Donating before the first of January
allows you to deduct this contribution on your upcoming tax return.
● You can also donate some investments like stock to a charity, which
will allow you to deduct the entire value of the stock and avoid
paying any tax on the appreciation amount.
Keep these tips and techniques in mind as you approach the end of the year and
prepare to file your taxes, and you may be able to come out ahead at tax time.
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