Year End Tax Tips: Part Two
In part one of the series we talked about four common ways to keep your income taxes as low as possible. They included paying extra on your mortgage, making charitable contributions, paying property taxes now, and paying medical bills. While these are four great tips, there are many others ways to lessen your tax liability.
1. Increase business expenses. If you own your own business, or are self-employed, look to increase your expenses before the year ends. You can do this by purchasing new supplies and equipment, paying bonuses to employees, etc.
2. Consider retirement savings. Money contributed to a retirement plan can help reduce your taxable income. This is a good idea, but make sure you do not go over your contribution limit for the year.
3. Lower your capital gains. To offset capital gains you can sell investments that are not performing up to par. Believe it or not, losses can offset gains at a ratio of $1 to $1. In turn, losses that exceed gains can be deducted.
Do any of these tips work for you? While all of them are something to think about, you may only be able to take advantage of one. Out of the three tips above most taxpayers find that they can use number two year in and year out. After all, everybody should be saving for retirement.
These three tips, along with the four from part one of the series, should allow you to save money this tax season. And who doesn’t want to do that?
