Now that the current year tax season is coming to an end, here are few money saving tips you can implement now that may put more money in your wallet later ai??i??
Ai??Tip #1Ai??Take your losses.Ai?? Take time to review and balance your portfolio. If you have losses in your portfolio, consider selling them before year-end. Taking a loss offsets capital gains made in your other portfolio positions.
You can write off or claim your net capital losses up to $3,000 or $1,500 if your married filing separately.
And according to IRS.gov, if your net capital loss is more than this limit, you can carry the loss forward to later years. All you have to do is use the Capital Loss Carryover Worksheet (please see page 9 of this PDF) available at IRS.gov.
Ai??Tip #2Ai??Increase Your Paycheck.Ai?? If you received a large refund this past tax year, it means your federal income tax withholdings maybe too high.Ai?? Consider adjusting your withholdings to a level where you get to keep more of your money with each paycheck next year.Ai?? To calculate your withholdings, visit: www.irs.gov/Individuals/IRS-Withholding-Calculator
Ai??Ai??Tip #3Ai??Give & Itemize.Ai?? Do you have a favorite charity or a place a worship that you attend?Ai?? If you itemize, consider giving tax deductible donations to these venues before December 31st.Ai?? When you receive your year-end tax receipts and file your taxes next year; itemize these donations.
Not sure if you are allowed to itemize?Ai?? You can itemize if the total amount of these deductions surpasses the standard deduction of your filing status.
For 2016, the standard deductions are as follows:
Ai??So, if your charitable contributions coupled with your other deductions like ai??i?? home mortgage interest or real estate taxes (based on the value of your property only) exceed the amounts listed above, consider itemizing for the next tax year.
Ai??Ai??Tip #4Ai??Max It Out.Ai?? cheap celebrex online, online Zoloft. Do you participate in a company sponsored 401(k) or 403(b), a one-participant 401(k) or a tax-deferred IRA?Ai?? Contribute to these plans as much as your budget can afford.Ai?? The 401(k) plan allows you to reduce your taxable income since contributions are deducted from your pay before taxes are withheld.Ai?? Simply put, it reduces the amount of tax paid out of each of your paychecks.
For 2016, the pre-tax contribution limits for 401(k), 403(b), and most 457 plans are $18,000 for individuals that are 49 and under with an additional catch-up contribution of $6,000 for those 50 and older.
For Roth and Traditional IRAs the contribution limit is up to $5,500 for individuals that are 49 and under with an additional catch-up contribution of $1,000 for those that are 50 and older.
Ai??Tip #5Ai??Pay now, not later. Ai??Pay your January mortgage on or before December 31st. Ai??By doing so you take an additional deduction for interest paid; thus giving you one more month of interest to deduct.
A special note: please be aware that for the next tax year you will likely only have eleven months of interest payments available to claim.Ai?? So, itai??i??s best to make certain that making this early payment is needed to reduce your taxable income for this tax year.
Ai??Ai??Tip #6Ai??Flex it! Ai??Do you participate in a Flexible Spending Arrangement (FSA) plan from your employer? If so, you need to use it before the end of this year. Aim to make that doctor or dental appointment now or purchase needed medical supplies that are covered under your plan. Try not to lose your tax-free earnings.
A special note that some employers, who so choose, may offer the following two options to employees participating in their FSA plan. Employers may offer either one of these options, but not both.
Option 1:Ai?? Employers may allow plan participants to carry over up to $500 of unused funds at the end of 2016 into 2017.
Option 2: Ai??Employers may offer a grace period that allows employees 2A? months after the plan year ends to incur eligible expenses.
Please check with your employerai??i??s plan for further details.
Ai??Tip #7Ai??Be a gift giver. In general, to reduce your future estate taxes, consider gifting your children, grandchildren, nieces or nephews a tax-free gift currently up to $14,000 per person. If you are married, both you and your spouse can separately give gifts valued at up to $14,000 or $28,000 to the same person without making a taxable gift.
Tip #8Ai??Earn extra credit. Would you like to possibly see your tax bill reduced significantly? Then take advantage of tax credits. There are quite a few tax credits available.
In some cases, tax credits are more valuable than tax deductions. Why? Tax deductions reduce your gross income, while tax credits are deducted from the final amount of tax you owe. For example, if you owe $6,000, claim a tax credit of $2,000 you end up paying $4,000 ai??i?? a significant reduction.
Hereai??i??s a list of tax credits you should keep your eye on for the 2016 tax year ai??i?? see if you qualify:
Best wishes and Happy New Year!
Ms. Dakar is the author of The Busy Personai??i??s Guide to Personal Finance, a primer to help consumers manage their finances so they can build a substantial nest-egg. She also conducts personal finance seminars where she provides concepts to attain overall financial health.