Last Minute Tax Strategies That Can Save You Money

As the year winds down to a close and Holiday cheer is in the air, the last thing you probably want to think about is your taxes. However, it's a great time to implement last minute tax strategies to maximize your deductions for this year and minimize your upcoming taxes.

Use these strategies to save money on your taxes at the last minute:

1. Delay your income. Minimizing your income is one way that you can save money when you file your taxes. You can achieve this by deferring or delaying some of your income until the next year. Receiving this income in the first week of January rather than the last week of December can pay off big!

• Do you have clients or 1099 income that you can delay or push back until January 1st? If you can push back any of your hours or invoices, try to do so.

2. Tax credits. Tax credits are similar to deductions, but they take money directly off of your taxes owed or add directly to your refund rather than just deduct money from your income. Tax credits can save you a significant amount of money. Since tax credits change from year to year, do some research to see which credits you qualify for.

• Some examples of tax credits include retirement savings credit, adoption tax credit, credit for the elderly and disabled, child tax credit, dependent care credit, HOPE credit, and lifetime learning credit.

• Tax credits also exist based on the Energy Tax Incentives Act, and include credits for solar energy equipment, energy-efficient improvements to the home, and the purchase of hybrid vehicles and other alternative energy vehicles.

• Tax credits all have unique qualification requirements and purposes. HOPE credit and lifetime learning credits pertain to education, for example. Many tax credits apply to adopting or raising a child. It's important to research which ones actually apply to you.

3. Deductions. You can load up on deductible expenses in December to reduce the taxable income for the year, especially if you have income from self-employment or own a small business. Ensure that you include only legitimate deductions, because the IRS is careful to scrutinize every one.

• Prepay your taxes, which will count as a federal deduction. If you withheld your local or state taxes this year and you're planning to itemize your deductions, this will benefit you.

• Contribute as much as you can to your 401(k) or other tax-deferred retirement plan and you'll increase your savings for retirement while cutting your taxes.

• Pay your January mortgage bill early to include additional mortgage interest, which is a deductible expense.

4. Donate to charities. Take advantage of the holiday season, a true season of giving, by donating to your favorite charity. Donating before the first of January allows you to deduct this contribution on your upcoming tax return.

• You can also donate some investments like stock to a charity, which will allow you to deduct the entire value of the stock and avoid paying any tax on the appreciation amount.

Keep these tips and techniques in mind as you approach the end of the year and prepare to file your taxes, and you may be able to come out ahead at tax time.