Year-End Tips to Lower Your Personal Taxes

Once the calendar flips to December, it’s a good idea to identify those last-minute strategies that can lower your personal tax exposure before the end of the year. Listed below are a few ideas that may work for you so you can enjoy more of your money and give less to Uncle Sam.

Cut Your Losses

If you own stocks or mutual funds that lost money, you can sell them and deduct up to $3,000 on your federal taxes while also offsetting any gains. If you have more than $3,000 in losses, the balance can be carried over to next year.

Remember, you cannot purchase the same or a substantially similar stock within 30 days before or after the sale, or you may lose your deduction.

Give to Charity

Contributing to charity is a great way to get a deduction and help others while helping yourself as well. Remember to save the receipt to back up any contribution; the old rule that you only need to have a receipt to back up contributions of $250 or more has been eliminated.

Boost Retirement Contributions

If you have a tax-deferred IRA such as a 401(k), you may want to make the maximum pre-tax contribution. If you can’t afford that, then at least try to contribute up to the maximum that will be matched by your employer. 

Cash Is King

You can give as many family members as you like up to $15,000 per year ($30,000 from a married couple electing to split gifts) without reporting it to the IRS. Generally, you will not pay taxes on the gifts, and it isn’t considered taxable income for the recipient.

Fund Your FSA or HSA

The IRS lets you direct tax-free dollars directly from your paycheck into your Flexible Spending Account (FSA) or Health Saving Account (HSA), so consider maxing out your contribution to lower your tax bill. In 2019, the limit ranges from $2,750 – $8,000, depending on if you are less or more than 55 years old, and if you are contributing as an individual or a family. You’ll have to use the money during the calendar year for medical and dental expenses.

Remember, these suggestions are just for general information only. Consult your CPA, tax attorney, or enrolled agent for information relating to your specific situation.