Year End Ways to Save on Taxes

The holiday season is here, and time is running out on 2013. However, just because there are only a couple weeks left in the year does not mean there are no more opportunities to save on your taxes. In fact, there are several year-end ways to lower your taxable income.

Here are some of the best:

Make a Donation to your Favorite Charity

This is the season of giving, so why not maximize your gifts to charity and help your tax situation at the same time? You can donate cash and deduct the amount (within certain limitations) on your taxes. However, there are other creative ways you can donate to charity as well, including:

  • Personal Property/Clothing: The IRS allows you to deduct the full market value of the clothing or personal property you donate.
  • Vehicles: Cars and other vehicles are a little tricky. If the vehicle donated is going to be used by the charity, you can deduct full market value. If the charity sells it, you can only deduct the amount they are able to sell it for.
  • Stocks: Donating stock is a great way to improve your tax situation, especially if these stocks have gained value since you purchased them. Not only are you able to deduct the full value of the stock, you are also able to avoid capital gains on the stock appreciation.

Maximize Your Retirement Plan Contribution: If you have an IRA or 401K and have not already contributed the maximum allowed during the year, now may be a good time to make a large year-end contribution. If you have the cash available, any dollar you put into your retirement account (within the set limitations) is a dollar saved from your taxable income. The same holds true for similar financial vehicles such as 529 college savings accounts, health savings accounts (HSAs), and flexible spending accounts (FSAs).

Pay Deductible Expenses Early: Mortgage interest, property taxes, and state/local taxes are all expenses that can be deducted on your income taxes. Even if the payments are due next year, making them this year allows you to deduct them on this year’s taxes.

Defer Your Income

There are a couple ways you can defer your income until the following year:

  1. Ask Your Employer

Ask if your employer is willing to withhold your final paycheck until January. Also, if you typically receive a year-end holiday bonus, find out if that payment can be delayed until January as well.

  1. Delay Client Billing (for self-employed)

If you operate your own business, it may be quite easy to keep your income lower in December; just change the due date on your customer invoices until the early part of January. Some of your customers/clients may still pay in December, but chances are you will be able to move some of your income into the next year.

If your income typically falls along the border of two different tax brackets, then it is a good idea to maximize your year-end tax savings. Speak with your accountant about these and other ways you can keep your 2013 tax burden as low as possible.

Scroll to Top