End-of-Year Tax Tips You Should Make Right Now
As 2016 draws to a close, and you start looking to all the ways you are gonna turn your life around starting in 2017, it pays to take a few minutes to think about how to end 2016 off on the right financial foot. These end-of-year tax tips will help you save yourself some major cash.
No one likes paying taxes, but few realize there are many easy ways to reduce your tax bill.
Here are 5 end-of-year tax tips you should make right now:
1. Max out your 401k (or at least top it off)
Every dollar you put in your 401k is a dollar you don’t have to pay taxes on. Well, at least every dollar up to the $18,000 yearly maximum 401k contribution. Maxing out your 401k contribution for the year is a great way to lower your tax bill and save for retirement at the same time. And not only is that money tax-free this year, but it grow over time to be worth much more. And if you can’t afford to max out, don’t worry, figure out how much you can add to your 401k and do that.
2. Shift income into the next calendar year
Whatever your feelings are about the election this year, chances are pretty good that tax rates will be going down in 2017 rather than staying flat or going up. So if you have any income that can get delayed to 2017 then it might be worth doing that – it could save you come tax time.
3. Shift some deductions into 2016
It may be possible to pay some of next year’s deductible expenses in December and get the tax benefit in 2016 rather than 2017. For example, if you have a property tax bill due in January – you may be able to pay it in December and claim it in your 2016 taxes. Or you may be able to pay your January mortgage payment in December and deduct the mortgage interest in 2016 rather than 2017.
4. Give to charity
Giving charity is always a way to get a tax deduction but again, if you think that tax rates are going down next year then it might make sense for you to make some of your planned charity donations in December 2016 rather than wait for 2017.
5. Tax-loss harvesting
If you have taxable investment accounts then you may want to consider offsetting your capital gains by “harvesting” some of your losses. The idea here is to sell you investment losers in order to offset your gains. Remember that this is only an advisable strategy if selling the stock fits into your overall investing strategy. And also remember that if you sell a stock for tax-loss harvesting then there are limits to buying that stock back.
