- Tax-loss harvesting – Offset your realized taxable gains on your investments (capital gains) with losses (capital losses). That means selling stocks, bonds, and mutual funds that have lost value to help reduce taxes on gains from winning investments. (Of course, you don’t want to undermine your long-term investing goals by selling an investment just for tax purposes.) Tax-loss harvesting needs to be done by December 31
- Charitable donations are an effective way to reduce your taxable income when you itemize on your tax returns. If you’ve been meaning to make a donation and want to lower your tax bill for 2015, be sure to make your contributions by December 31. Now is also a good time to clean out a closet or basement and donate clothing and household goods. Remember to get receipts for non-cash donations.
Give to family members. You are able to give up to $14,000 a year to as many individuals as you choose without paying gift taxes, which helps reduce the amount of your estate. You can give cash, stocks, bonds, and portions of real estate. You must do this by December 31
- One way to maximize the value of tax deductions is to bunch two years’ worth of itemized deductions into a single year, especially if you expect your income to be higher. For example, if you have unreimbursed work expenses that you incurred early in the year, you might be able to pull next year’s expenses into this year and double up your 2015 deduction.
Consider making an extra mortgage payment or prepay taxes (state and real estate) to allow additional deductions.
- Even if you contribute regularly to your 401(k) or 403(b), take a few minutes to see whether you can make an additional contribution before the end of the year—especially if you aren’t on track to contribute the full amount your employer matches. The maximum you can contribute in pretax dollars for 2015 is $18,000, or $24,000 if you’re age 50 or older, and contributions must be made by December 31, 2015.
- There are two types of flexible spending accounts that allow you to set aside pretax money and then reimburse yourself, with calendar-year “use-it-or-lose-it” deadlines: health care and dependent care. The U.S. Treasury Department has relaxed the rules a bit this year. Employers can allow participants to carry over up to $500 in unused funds into next year, so make sure your balance doesn’t exceed that. Some plans allow you to submit 2015 claims until March 2016—check with your employer.
