6 Strategies To Lower Your Tax Bill Before Year-End

In this article, you will discover:

• The effect of deferring income on your taxes
• The effect of retirement account contributions on your taxes
• What kind and size of deductions make it worthwhile to itemize

How Can Tax-Loss Harvesting Reduce My Tax Bill?

If you have assets that are losing money, you can sell those assets. You can take a loss and then apply that loss to offset capital gains taxes on money-producing assets. That offset will help you save on capital gain taxes.

Should I Consider Charitable Contributions For Tax Benefits?

Charitable contributions are deductible if they are large enough. A single person is entitled to a $14,600 standard deduction. A married couple is entitled to a $29,200 standard deduction. You would have to donate more than that to make it worthwhile to itemize your deductions.

How Can Contributing To Retirement Accounts Help With Taxes?

When you contribute to a retirement account other than a Roth account, you contribute pre-tax money. That money will not be taxed during the year you contribute. It will be taxed when you withdraw the money after age 65 when it is assumed you would be making less money and in a lower tax bracket.

Can I Defer My Income To Lower My Taxable Income?

One easy way to do that is to put part of your income into an IRA, which defers the taxes until later in life. You can also ask your employer to withhold part of your income and pay you that amount the following year. This strategy can lower your taxable income for one year, but it will eventually catch up with you.

Can I Give Gifts To Reduce My Taxable Estate?

There is currently a $13 million universal deduction for combined gifts and the value of your estate. You can give gifts, which will reduce the value of your estate, but it has to be counted in that universal deduction. You can give away up to $18,000 annually without a gift tax.

What Deductions Do People Commonly Overlook?

Because the standard tax deduction is so high today, it is hardly worth anyone’s time to itemize their deductions. The standard deduction is $14,600 for single filers and $29,200 for married joint filers. If you have very high charitable giving and or very high medical expenses, those are the only two things that would make it worthwhile to itemize your deductions.

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