The year end is approaching. There is still time to plan your last minute strategy to pay fewer taxes.
TAKE THE ADVANTAGE OF THE 401(K) CONTRIBUTION
The contribution brings you the tax savings that correspond to your tax bracket. If you’re in the 25% bracket, a $4,000 contribution to your 401(k) would typically save you $1,000 on your income tax.
This one is very well known. You must itemize in order to take a charitable deduction. Be careful with this one though. Many political contributions are not deductible. IRS also scrutinizes the used items donated to the non-profit organizations. Make sure you have the receipts to back them up.
Choosing a Roth IRA over a traditional IRA allows you to sacrifice an upfront tax deduction for the chance to get tax-free treatment on your retirement account’s income and gains. Although you may not see and enjoy the immediate savings on taxes right now, you will be able to enjoy the benefits of the tax-free withdrawals from the Roth IRA accounts after you retire.