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It’s the holidays and you’ve got tons of things to do. Pick up gifts, trim the tree, put up lights, attend holiday parties, reunite with friends and… do a quick tax review?
Unfortunately, yes. While this may be the busiest time of the year, it’s also a time when a quick once-over on your tax situation is a must. Because Uncle Sam is pretty strict when it comes to cut-off dates, and December 31st is the biggie. So it can pay big-time to take a minute or two and make sure that what needs to be done by year-end gets done. Example? If you lost money in a stock or mutual fund this year, you can deduct the loss and use it to offset any gains you might have made (or up to $3,000 of your normal income)… as long as you sell by December 31st.
Other things you should consider before year’s end?
- Pre-paying deductible expenses – Making Your Life Less Taxing
- Donating to a charity – Checking Out Charities
- Making contributions to a retirement plan – Investing For Retirement
If you’re not sure what you could or should do now to minimize your income taxes next April, here’s an idea: take a look at your return from last year. If you itemized, look at your deductions. Those are expenses that you might be able to pre-pay now and deduct in April. For example, if you pay your January mortgage payment in December instead of waiting until January 1st, the portion of that payment that represents interest could be deductible in tax year 2009 rather than 2010. Go down the list of things you deducted and see if there’s anything you can pre-pay… at least if your goal is to lower this year’s income taxes.
One last thought: While spending time with your taxes may not be at the top of your holiday wish list, it could come in handy. When your distant relatives drop by for the never-ending visit, now you have an excuse to leave the room for a couple of hours. Excuse yourself for “urgent family business”, head for your home office with a drink, spread your taxes on your desk and watch the game for an hour or two. That way your holidays and next April with both be less taxing!