10 End of Year Tax Tips

Always consult your tax accountant before making any decisions or submitting your taxes.

As the year draws to a close, it’s a perfect time to implement some simple and intelligent tax strategies that can help minimize your tax burden and maximize your tax refund when you file your returns.

To ensure your financial affairs are organized and to save money on taxes before the year ends, consider these 10 easy and effective tax tips. Gather all your receipts for tax-deductible expenses and income sources to make the most of these strategies.

Helpful Links:

Taxes Done Right. Anytime, anywhere, on any device. Start today.

TurboTax Live: Real experts can help or even do your taxes for you. Backed by our 100% Accurate, Expert Approved Guarantee.

TurboTax Free Edition: $0 Fed. $0 State. $0 to File. For simple tax returns only. Not all tax payers qualify.

TurboTax Live Full Service: Let a tax expert do taxes for you, start to finish. Your dedicated tax expert will find every dollar you deserve, guaranteed.

TurboTax for Students: When you file with TurboTax this year we do the hard work for you by giving you a FAFSA friendly view of your taxes.

TurboTax for Students: When you file with TurboTax this year we do the hard work for you by giving you a FAFSA friendly view of your taxes.

  1. Delay Bonuses: If you’re anticipating a year-end bonus due to your hard work, be aware that this extra income might push you into a higher tax bracket and increase your tax liability. To mitigate this, you may want to postpone receiving the bonus until the beginning of the following year. By having your bonus paid in January, you can still receive it close to year-end while avoiding immediate tax obligations.
  2. Accelerate Deductions and Defer Income: Certain tax deductions are recognized in the year they are paid. For instance, if you own a home, you can deduct your mortgage interest. Making an extra mortgage payment on December 31 allows you to claim the additional interest paid as a deduction in the current tax year. This enables you to benefit from the deduction immediately instead of waiting until the next year. Note that tax reform has modified the mortgage interest deduction for homes purchased after December 15, 2017.
  3. Donate to Charity: The holiday season presents an excellent opportunity to declutter and donate clothes and household goods to those in need. By donating non-cash items and making monetary contributions to qualified charitable organizations, you not only help others but also become eligible for tax deductions if you itemize your deductions. Additionally, if you volunteer for a qualified charitable organization, remember to track your mileage (deductible at 14 cents per mile) for tax purposes. Make sure to complete these donations by December 31 to claim them on your taxes.
  4. Enroll in a Course: Investing in your career advancement or skill improvement can also lower your taxes and boost your tax refund. Paying for upcoming quarter’s tuition fees by December 31 can make you eligible for the Lifetime Learning Credit, which offers a valuable tax credit of up to $2,000 per tax return.
  5. Maximize Retirement Contributions: Contributing to your retirement savings account is an effective way to reduce taxable income while building your nest egg. Whether you have a 401(k) or a Traditional IRA, making contributions allows you to simultaneously decrease your taxable income and save for the future. If you’re self-employed and have a SEP IRA, you can contribute up to 25% of your net self-employment income or $61,000 for 2022 ($67,500 if you’re 50 or older). You can make a 2022 SEP IRA contribution until the extended tax deadline and potentially qualify for a deduction.
  6. Utilize Remaining FSA Funds: If you possess a Flexible Spending Account (FSA) and have funds remaining, make sure to schedule any overdue doctor visits. Although the “use it or lose it” rule may not strictly apply anymore, you might only be able to carry over a limited amount (e.g., $570) of unused money from your 2022 FSA into the next year. Your plan may also impose a time limit, allowing you to utilize the funds only within 2 1/2 months after the plan year ends.
  7. Capitalize on Investment Losses: If you have investments in your portfolio that have decreased in value, consider realizing those losses and offsetting them against any investment gains. By selling the losing investments, you can use the losses to counterbalance your recognized gains. If your losses surpass your gains, you can apply up to $3,000 of the loss against your regular income. Any remaining losses can be carried forward to the next tax year.
  8. Adjust W-4 Withholding Allowances: If your tax outcome differed from your expectations in the previous year, or if you experienced significant life changes such as having a baby, receiving a pay raise or reduction, unemployment, or starting a new job, now is an ideal time to adjust the amount of taxes withheld from your paycheck. By modifying your withholding on your W-4 form and submitting it to your employer, you can align your tax withholdings more accurately.
  9. Take Advantage of the Other Dependent Credit (ODC): If you financially support non-child dependents such as parents or grandparents, ensure you utilize the new “Other Dependent Credit.” This credit can provide up to $500 in tax reduction for each qualifying dependent, directly reducing your tax liability.
  10. Embrace Energy Efficiency and Electric Vehicles: If you’ve been exploring ways to reduce your home energy bills or your reliance on gas, consider going green and leveraging energy-efficient credits or electric vehicle credits. Taking advantage of these incentives before the year ends can lead to substantial tax savings. It’s crucial to remember that tax credits directly reduce your tax liability, resulting in more money in your pocket.

By implementing these 10 tax tips, you can optimize your financial situation, minimize taxes owed, and potentially increase your tax refund. Act before the year ends to make the most of these opportunities and secure your financial well-being.

Scroll to Top