As 2017 disappears before our eyes, many of us are too busy shopping for the holidays and planning New Year's parties to have taxes on the brain. But with only about a month left before we ring in 2018, now's the time to make a few easy tax moves that could save you a bundle when you file your return. Here are four in particular to think about.
1. Sneak some more money into your 401(k)
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While you have until the tax filing deadline next year to contribute money to your 2017 IRA, you only get until the end of 2017 to contribute to a 401(k) and have it count for tax purposes this year. So if you're thinking about boosting your contribution rate during your last pay period, now's the time to get moving -- before that window closes.
It especially pays to further fund your 401(k) if you're collecting extra money late this year in the form of a job-related bonus, particularly since that influx of cash will otherwise just add to your tax burden. Similarly, if your loved ones are generous during the holidays this year and are kind enough to give the gift of money, consider sticking that cash into your retirement plan.
Remember, the more you contribute to your 401(k), the more of your income you'll exclude from taxes. So if your effective tax rate is 30%, and you manage to sneak an extra $1,000 into your plan before year's end, you'll save yourself $300 just like that.
2. Do some spring cleaning -- in December
If you itemize on your tax return, you're allowed to claim a deduction for any money you give to a qualified charity. But did you know that you can deduct the value of the goods you donate, too?
As long as you retain a detailed receipt of the items you give away, and you hand them over to a registered charity, you can deduct the fair market value of your donation, which is the value those belongings would command in their present state (as opposed to their original value). If you're sitting on a pile of holiday gifts you don't want, rather than fight the crowds to return them, think about giving them away to those in need -- and lowering your taxes in the process.
3. Defer some income to 2018
If you're a permanent employee and get paid on a regular schedule, you probably don't have too many options for pushing some income to the following year. But if you're self-employed, deferring income is generally a simple matter of holding off on invoicing clients or extending your clients' payment terms so that they're more likely to take their time.
Of course, deferring income to 2018 will only help you lower your taxes for the current year; on the flip side, you'll be adding to your tax burden for the following year. But if your earnings level was higher than usual this year, and you haven't racked up many deductions thus far, it might pay to hold off on collecting that income -- and worry about the associated taxes later on.
4. Make your January mortgage payment a bit early
The mortgage interest deduction is one of the most lucrative ones out there. So if you make an extra payment toward your mortgage this year, you'll have that much additional interest to write off for 2017. Remember, the IRS lets you deduct mortgage interest whether your associated payments are scheduled or not, so if you're willing to get your January payment in a little early, you'll reap the benefits on your 2017 return.
We all want to save money on taxes, and these simple moves will help get you there. But don't delay -- 2018 will be here before you know it.
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