With only one month left in the calendar tax year, now is the time to make some strategic moves to lower your taxable income for the year.
Before there year ends, you’ll want to give yourself the gift of savings on taxes. Below is a list of common tactics to take before the year’s end. See what applies to you and act on these now before it’s too late.
The IRS requires you to claim income made available to you within the tax year you are filing for. So if you received a year end bonus and you have the opportunity to take possession of the bonus, you must claim it for that year regardless if you took possession of the funds or not. However, if you structure your bonus in a way that you are not paid out until the following year, you can lower your taxable income for the year you are filing.
Incur Next Year’s Expenses
If you plan on incurring expenses in the next year, go ahead and make those purchases in December so you lower your taxable income for the year prior to the year you plan on making those purchases. Capital expenses though (expenses that are for items that last over several years) will need to spread out the cost over the how many years the expense will be. For example, if you buy an insurance policy that is good for 3 years but pay for it all up front, the cost will be spread out as expenses over the 3 years—the cost divided by 3.
Make a Charitable Contribution
Not only is giving good for the community, it’s also good for lowering your taxable income. This doesn’t have to be monetary contributions either; you can give away assets and claiming the Fair Market Value of the assets as a deduction.
Set Up a Health Savings Plan
Contributions to a health savings plan (also known as a Flexible Savings Account) can be deducted from your taxable income.
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