Once the new year begins it won’t be long before you start having to sweat over your taxes. Nobody wants to be thinking about taxes right now, especially with the holidays approaching, but now is the best time for you to take action to ensure you trim the most off your tax burden next year. After all, it will be this year’s financial decisions that affect what you will be paying in just a few short months. With gift buying stresses, bad weather, and the day-to-day annoyances that occur no matter what time of year it is, you probably don’t want to be thinking about taxes. But if not before the taxable year is over, when?
Make a sizable donation
With Christmas shopping underway it might seem difficult to spare some serious cash for charitable purposes. But it’s the time of year for giving, after all, and if you haven’t yet made a big donation, you should definitely consider it. Whether it’s an old car, a valuable ex-girlfriend’s promise ring, or a good old fashioned check, whatever amount you dish out now will be shaved off your bill to Uncle Sam.
Max out your retirement savings
If your retirement savings are tax deductible up to a limit, as is the case with a 401(k), then reach that limit as much as possible. It’s in your best interest to do so, in both the short-term and the long-term. And it’s not as though the money disappears until you retire; funds can always be retrieved at a later date (although taxes will then apply).
Organize your deductibles and credits
If out-of-pocket medical spending exceeded 7.5% of your gross adjusted income then you can see those costs removed from your tax burden. In addition, student loan payments also warrant deductions. Make sure to get all your bills and billing statements organized before the end of the year. While this paperwork ought to be mailed to you, be proactive and get it yourself first.
Put off payments and bonuses if possible
It’s not easy when you need money for buying gifts, but if you can, try and hold off receiving your end-of-year bonus or last minute payments until next year. These big payoffs could potentially push you tax over the edge of a tax bracket, or at the very least add an extra bit of tax burden you could otherwise do without. Do this, and save yourself a decent amount of scratch you could otherwise be kissing goodbye.
You certainly don’t want to be thinking about taxes during the holiday season: Didn’t you just pay them? Aren’t they not due for another several months? Yes, but planning should start now. Otherwise you are only guaranteeing more work for yourself, and more financially based heartache, down the road.
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