As the year comes to an end, here are seven tax tips to help you close out the year:
- Consider adding to your 401(k) account before the New Year arrives... By doing this you will allot yourself a little more income that the IRS will not be able to touch, not to mention, the sooner you contribute to this account, the longer you will have to allow your earnings to increase.
- If you have a Traditional IRA, think about changing it to a Roth IRA. With a Roth IRA, there are typically no taxes on withdrawals if you are at least age 59 1/2. Consult with your tax professional to see if converting your Traditional IRA to a Roth IRA is a smart tax choice for you.
- If you have any under-performing Personal Investments, consider selling them before the New Year to possibly counterbalance any capital gains tax liability you may have.
- If you have a college-aged student, it may be a good idea to go ahead and pay tuition before the year's end. You may be able to claim the American Opportunity Tax Credit or the Lifetime Learning credit by doing this.
- Donating to charities is another way to reduce your tax bill. Aside from just dollar donations, you can also donate old cars that are no longer running. Some charities will even make arrangements with you to pick them up so you don't have to worry about it!
- Another way to make a tax-deductible gift to charities is by donating stocks or mutual funds. Consider donating funds that you've held onto for a while that no longer fits with your investment portfolio. Holding onto the stock or selling it will be up to the charity and no longer your responsibility.
- You can even receive a tax break by being a homeowner. If you itemize and make your January mortgage payment before the New Year, you can even deduct the interest from that payment when it's time for your tax return.
Provided for informational purposes only. Not offered as tax advice. Please consult with your tax advisor.