It is very easy to become too involved in family reunions, Christmas shopping and New Year’s getaways during these festive Christmas days. But don’t let fun get in the way of important financial decisions that could yield significant results next year.
Give Gifts Tax-Free and Reduce Your Estate Tax
If you are looking for a way to reduce your taxable estate, you can do it by giving away up to $13000 ($26,000 if you are married) in gifts per year tax-free to as many people as you like. Right now, the gifts amounting to $13,000 are annually excluded in determining taxable gifts. This means that you can give up these gifts in property or cash without having to pay the tax for it.
Use up The Rest of Your Vacation Time
On average American workers receive 18 days of vacation time. However, they usually don’t take this many vacation days and settle for 14 says, saving their employers about $68 billion of time. Yes, job competition is hard nowadays, but don’t give away your time to your employer to show your dedication (you can do it by putting in hard work when you are supposed to). If you can’t relax, you can use these days to earn some money on the side.
If you have stocks and some of them did not perform well, you can save up to $3,000 by matching gains and losses. To do that, sell some of your winners and offset the gains by getting rid of losing stocks, saving on the capital gains tax. The end of the year is also a good time to rethink your stocks strategy.
Accelerate Deductions and Postpone Income
You can minimize your current year tax liabilities by pushing your income into next year and accelerate everything that can result into a tax deduction into this year. Consider postponing dividends and bonuses until next year and accelerate real estate taxes, interest payments and income taxes.
If you are planning on donating, it is better to do it before New Year’s as tax deductions apply in the year when they are made. Donate stocks instead of money – this way you won’t pay taxes. When donating household items or clothing, don’t forget to take your receipt. And if you make a donation to such funds as Vanguard, Schwab and Fidelity, you will receive an immediate tax deduction.