With just a couple days left in the year, here are a couple of quick power plays you can take to save you some money on your 2016 taxes. I will keep this short since right now your time is better spent taking action to save you money rather than reading about how to save money on your taxes.
Group your deductions. If you are close to exceeding the standard deduction, consider making another charitable contribution for 2016. Pay your real estate taxes early if you are able, make an extra mortgage payment, even pay your winter session college tuition before January 1. Don't forget to get receipts together for your charitable contributions and if you are 70 ½ or older consider having a charitable contribution made directly from your IRA to your favorite charity.
Use your FSA funds. If you have money left in your FSA now is the time to stock up on your refills, get new glasses or sunglasses, get that missing crown done, or even pay your next month's orthodontist bill. Remember your FSA is a use it or lose it account so make sure you use it!
Save for retirement. Put money into your retirement. If you are self-employed you only have to set up a Keogh or 401(k) plan by December 31. Remember you have until April 18 to make contributions to your IRA.
Harvest Losses. It sounds complicated, but "loss harvesting" or selling investments that are down, simple means taking the loss intentionally to help offset gains you had through the year. If you have more losses than gains or more than $3,000 in excess losses, you can carry any remaining loss amount to the next year and you can continue to do that until you use up your losses. Remember if you sell stock to harvest the loss, you're prohibited from purchasing substantially similar stock 30 days before or after the sale that generated the loss. For mutual-fund shares, you can reinvest the proceeds in a similar stock. That said, I wouldn't recommend changing your investment strategy just to harvest a loss for tax savings unless you are sure it will benefit you in the long term.
And if you aren't sure about a tax situation or which strategies might help you, now is a great time to consult a Tax Pro. Though many returns might not actually be processed until after February 15 - more on that another time, there is no reason not to get your return ready and file it early. Happy New Year; here's to keeping more of your money in your pocket in 2017!