Year-End Moves to Save Money on Taxes

By Taxes FOXBusiness

The last thing you might be thinking about this Christmas season is April 15 -- but you'd be wise if you did. By planning ahead, before the end of the year, you can save yourself money come tax time.

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Here are five moves to make now:

1. Harvest your tax losses. It's been an up and down year for stocks and now is a good time to sell your losers. Assets in you portfolio that have lost value can be a valuable tax tool. Capital losses can be used to offset any capital gains. Losses greater than $3,000 can be carried forward to future tax years. This tool is especially valuable to high-income earners who are subject to the Affordable Care Act Net Investment Income Tax (NIIT) of 3.8%.

2. Top up your retirement account by adding to your 401(K). Money you contribute to your workplace retirement savings account is excluded from your income, and will therefore lower your tax bill. Contribution limits for 2015 are $18,000 for taxpayers 49 and under. Workers 50 and over can contribute an additional $6,000.

3. Clean out your FSA. If you have a flexible spending account with your employer, be sure to use that money by year end. While the IRS changed the rules a couple of years ago to allow people to carry over $500 from their FSA into the new year, the change was optional for employers. If your employer doesn't offer a grace period, be sure to use that money pronto, or lose it! Admissible purchases no longer include over-the counter medications like ibuprofen or allergy meds.

4. Make your charitable contributions. As you put together your holiday shopping list, consider giving to charities that have earned the 501c3 designation. If you make cash donations, hang onto your canceled check or credit card receipt as proof of your donations.

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5. And, finally, if you typically get a large refund, this is the year to revise your W-4 so that your tax payments throughout the year more closely manage your tax bill. Scam artists are taking advantage of people's addiction to refunds by filing first under their social security number. By filing a revised W-4, you can deny scam artists your hard earned dollars.

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