Here are 10 year-end tax tips, courtesy of TurboTax CPA and tax expert Lisa Greene-Lewis:
1. Defer bonuses
If your hard work has paid off and you’re expecting a year-end bonus, that extra money can take you to another tax bracket and increase the amount of taxes you owe, according to Greene-Lewis. . To avoid this, you can consider deferring the additional income until early next year, says Greene-Lewis.
If your boss can pay your bonus in January, you’ll receive the money around the same time, but it won’t be part of your taxable income in 2021, Greene-Lewis says.
2. Speed up deductions and defer income
There are a handful of tax deductions that are recognized in the year you pay them, says Greene-Lewis. For example, if you own a home, you can deduct your mortgage interest. And if you make an additional mortgage payment on Dec. 31, you may be able to claim interest on that payment on your 2021 return, according to Greene-Lewis.
Before doing this, be aware that under the Law on tax cuts and employment adopted in 2018, if you bought a home after December 15, 2017, you can deduct up to $ 750,000 in total mortgage interest instead of $ 1,000,000 for homes purchased before that date, according to TaxAct, a US software company. tax preparation.
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3. Donate to charity
If you itemize your deductions, you can help someone in need and get a tax deduction for non-monetary and monetary donations given to a qualified charity, according to Greene-Lewis.
Make these donations count against your taxes by donating before December 31st. If you donate by credit card, you don’t have to pay it in 2021 to qualify for the deduction, says Greene-Lewis.
If you volunteer at a qualified charity, remember that you can also deduct mileage (14 cents for each mile) driven for charitable service, according to Greene-Lewis.
Under the CARES Act, even people who benefit from the standard deduction can take advantage of a deduction for cash donations of up to $ 300 made to a 501 (c) (3) organization, which doubles to $ 600 for married couples filing jointly, Greene- says Lewis.
This is something to keep in mind as nearly 90% of taxpayers now claim the standard deduction, which means they cannot otherwise deduct charitable contributions, according to Greene-Lewis.
The CARES Act has temporarily removed the limit on the amount of cash contributions you can deduct if you itemize. Usually,Deductions for cash donations are limited to 60% of your adjusted gross income, according to Greene-Lewis.
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4. Maximize your retirement
Another great way to lower your taxable income while building your nest egg is to contribute to a 401 (k) or traditional IRA, says Greene-Lewis. If you’re self-employed and you contribute to a SEP IRA, you can contribute up to the lesser of 25% of your net self-employment income or $ 58,000 for 2021, says Greene-Lewis.
5. Spend your FSA
If you have a flexible spending account and have money left over, be aware of your doctor’s visits, says Greene-Lewis. While the old “use it or lose it” rule doesn’t apply, you may only be able to carry over $ 550 to your FSA 2021 account at the end of the year, Greene-Lewis says.
6. Buy high, sell low
If you have investments that have lost value, did you know that you can lock in your losses and use them to offset winning investments? To do this, you must sell the losing investments, according to Greene-Lewis. If your losses exceed your gains, you can apply $ 3,000 of that loss to your regular income, and any remainder will carry over to the next tax year, says Greene-Lewis.
7. Make adjustments in the W-4 retainer
Maybe you didn’t get the tax result you expected in 2021 due to changes in tax laws or because you’ve been through changes in your life like having a baby, getting a raise or lower. salary, lose a job or get a new one. If so, now is a good time to adjust your withholding on your Form W-4 and resubmit it with your employer, according to Greene-Lewis.
8. Be aware of “other dependent credit”
Do you support your parents or grandparents? And another loved one? If this is you and is considered a dependent without children, be sure to take advantage of the new “other dependent credit”. This can reduce the taxes you owe dollar for dollar, up to $ 500, says Greene-Lewis.
9. Gather receipts related to property taxes or major purchases
Do you pay property taxes on your home or state income taxes? Did you pay a lot of sales tax on a large purchase? You can deduct property taxes, local or local, up to $ 10,000. In the past, these taxes were generally fully tax deductible, says Greene-Lewis.
10. Take a course
Taking a course to advance your career or improve your skills is a great way to lower your taxes, says Greene-Lewis. Paying your next term’s tuition by Dec. 31 can give you a tax credit of up to $ 2,000 per tax return, along with the Lifetime Learning Credit, Greene-Lewis says.
Michelle Shen is Money & Tech digital reporter for USA TODAY. You can reach her @ michelle_shen10 on Twitter.