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5 Tax Strategies to Consider Before the End of the Year

5 Tax Strategies to Consider Before the End of the YearNo one likes to think about tax strategies. However, whether you want to acknowledge it or not, tax season is coming around again – just as quickly as it did last year.

To make sure you can get through the tax season without doing any unnecessary damage to your budget, it is smart to start thinking about your taxes as soon as possible.

With that in mind, we have outlined five tax strategies below which you may want to consider prior to the end of the year. Of course, before you go ahead with any tax-related plan, it is always a good idea to speak with a qualified accountant.

Put Money in Your 401(k)

This tip is probably not breaking news, if you know anything at all about taxes and savings. Typically, the money that you contribute to a 401(k) is going to be made before taxes are considered, meaning that you will have a lower overall taxable income. Of course, this strategy is about more than saving money on your taxes – it is just as much about saving for the future. Growing your 401(k) as much as possible now will pay off in a big way down the line.

Pay Attention to Losses

Do you own anything which has experienced a capital loss? If so, those items could be used to offset the amount of capital gains on which you have to pay taxes. Think carefully about all of your assets to make sure you don’t miss out on a valuable tax benefit.

Make Donations

Giving to charity is a good idea for a number of reasons. For one thing, you will be helping people in need – and that is always valuable in any situation. Also, you will be doing yourself a benefit at tax time, as charitable donations tend to be tax deductible. Take some time to find charities which are close to your heart and make a donation that will help out all involved.

Make Sure Your Covered

Do you have health insurance? If not, you may wind up paying costly penalties on your taxes in the coming year. By covering everyone in your household with a qualifying insurance plan, you will be protected against both tax fines and unexpected medical costs. It is a good idea to have health insurance anyway, and the added bonus of avoiding a tax penalty makes it all that much more attractive to sign up for a plan.

Save Even More

Looking for more ways to save money while benefiting your tax situation at the same time? Look into the possibility of opening an IRA account. An individual retirement account is another way to put away money for your later years, and you may be able to get a deduction as a result of your smart planning. Saving money might not always be the most exciting thing you can do, but it will almost always benefit you in the long run.

 

What are some of the tax strategies you use to save money? Have you used any of these tax strategies before?

 

Photo courtesy of: Devanath

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John Schmoll is a Dad, husband and veteran of the financial services industry. He's passionate about helping people learn from his mistakes so that they can live lives free from the shackles of debt and empowered to make their money work for them. You can check out his other sites: Frugal Rules, for ways to improve your financial literacy; and Sprout Wealth for tips on different ways to make more money. John has been featured on Forbes, Lifehacker, Yahoo Finance and US News & World Report and more. If you're wanting to grow your blog, check out my blog coaching services to see how I can help you take your site to the next level.

One comment

  1. Good tips John. Most companies (maybe all?) won’t let you bump up 401k contributions outside of the open enrollment period, but if someone’s job allows it, that is certainly worth looking in to.

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