Here are four ways to lower your personal income tax obligation before December 31st:
Pay Deductible Expenses Early.
- Pay January’s mortgage by end of December
- Pay ahead for property taxes due in 2016
- Contribute more money to your retirement (IRA & 401K are deductible)
Donate to Charity.
- Use a Schedule A to itemize deductions
- Keep proof of your charitable donations
- You can deduct cash contributions up to 50%of your AGI; 30% for property donations
- Use IRS Pub 78 for a list of approved charities for deductible donations
Pay Tuition Early.
- Prepay tuition and expenses for academic periods that begin in January through March of next year
- See if you qualify for the American Opportunity Credit or the Lifetime Learning Credit
Defer Income.
- Deferring income is worthwhile if you expect to be in the same or lower personal income tax bracket next year
- Self-employed or cash-basis taxpayers should wait until end-of-year to send out invoices so they won’t receive payment until 2016
- Deferring income can be helpful every other year to take advantage of tax breaks
Do you have any other financially-savvy tips for reducing your personal income tax bill? We’d love to hear them! Leave your tips in the comments below.