With the end of the tax year rapidly on its way, it's time to start thinking about any last-minute steps you can take to help minimize your taxable income. By reducing your taxable income, you can help to keep your overall tax liability lower. In some cases, you might be able to save significantly. By addressing these things now, you allow yourself plenty of time to explore your options. Here are a few different things to consider.
Capitalize On The Education Credits
If you haven't used all of your education credits yet, look at your current tuition bills. Make some tuition payments before the year is over so that you can claim those remaining credits. Tuition payments aren't taxable, so your taxable income will be reduced by that amount.
Maximize Your Medical Deduction
If you've spent more than ten percent of your adjusted gross income on medical expenses this year, you can claim any additional medical spending as a deduction from your taxable income. In order to do this, you need to itemize your taxes, but you could potentially save thousands in taxable income if you still have last-minute medical expenses to pay this year. Consider how much you've spent so far and make the most of your medical payments if you can.
Put More Money In Your Retirement Fund
Retirement fund contributions are not taxed, so you can put more money into your retirement fund if you're looking to lower your taxable income. Whether you're contributing to an IRA or a 401K, you'll get this benefit.
Hold Off On Investment Liquidation
If you're close to the end of the year and you've been thinking about selling some stocks or liquidating other investments, wait until the new year. The same holds true for withdrawal from a retirement account. By waiting to take the payment until the new year, you'll place the tax liability for those funds into the next tax year.
Adjust Your Final Paycheck Date
If you have any control over when your final paycheck or year-end bonus will be issued, ask about adjusting it so that it's not issued until after the first of the year. Even if you've earned it this year, it's not taxable on this year's income unless the funds are actually distributed to you. By taking those payments after the first of the year, they'll be counted on next year's tax forms.
If you're concerned about how much you're going to be facing in tax liability, these options may help you to minimize your taxable income as much as possible. Talk with a local tax service, such as Balkcom Pearsall & Parrish CPA's PA, about other possible options.Share