Instead of waiting for the New Year, I'm focusing on doing better right now. Doing better health-wise, organizing-wise, contribution-wise and finance-wise are at the top of my list. If they are for you as well, then working on all those at the same time can benefit you come tax time. The IRS has your back when it comes to doing better and saving money.
Are you striving to be healthier? Don't wait! Elective expenses, like professional help for quitting smoking and losing weight can add up quickly -- and can often be deducted. Getting the advice of your accountant or attorney to help organize your finances and affairs, those expenses are deductible too. Charitable contributions, like the expenses for baking the cookies you donate to the holiday bake sale, are another great deduction. And don't forget to track the miles you travel when donating products or time. Write a check at the end of December and you can deduct that amount on your 2015 taxes since cash donations are deductible when they are made not when they are paid. Keep the cancelled check for your records. My wife has me get rid of a tie whenever I get a new one, which is inevitable around the holidays, as long as I donate that old tie to a charity then I get to deduct the fair market value. Win-win, new tie and a tax deduction! Itemized deductions can be limited depending on your situation, but they can add up quickly and can help you deduct more than the standard deduction. Remember you must have a receipt from the charity with the date, amount, and the fair market value of any gift you received for your donation. If you are unsure about what is deductible and what isn't, check with your tax pro.
Getting more organized includes budgeting and financing in my house. Look at your portfolio, are there stocks you should be dumping - taking a loss on a couple of strategically determined stocks can offset gains you made throughout the year. While you are at it, start putting your year-end statements in a big envelope now.
What about your retirement funds are those in order? A couple weeks ago, I wrote about the new myRA, from the United States Department of Treasury, which is a personal retirement savings account with many benefits. You can open an IRA now, fund it any time before April 18, 2016, and take the deduction on your 2015 taxes.
For most Americans, it would be a stretch, but let's just say you want to give someone a big cash gift this year. Let's say you're feeling really generous and want to give your BFF $10,000 dollars. Guess what? They would not have to pay any taxes on it. The IRS considers it a gift and gifts aren't taxable to the recipient... ever. You can give up to $14,000 a year to an individual and there are no tax consequences to you, but if you give more than that, you must file a gift tax return AND possibly pay gift taxes. Now, back to planet earth, this was just a fun way to lead into the real point - now is the time to optimize your giving to help you lower your taxes -- whether you are giving to yourself in the form of better health, better organization, or being a better person by giving of your time or your money.
Don't forget, paying a tax pro is tax deductible too and can save you a lot of time and trouble.