You were thinking that now is the time for mistletoe and holly… it may be, but it’s also the best time to be proactive with your finances and pre-tax planning.  There are some key things you can do right now to reduce your monthly expenses and your tax bill in the spring, the catch is that most of them need to be done before the end of the year!

Most of these are only going to help if you are able to itemize your deductions and not taking the standard deduction (aka. More than $6,300 for singles or $12,600 for married couples).

1.  Last Minute Donations

Now is the time to get in last minute donations to charities.  This can be money donations, but can also be items you are cleaning out and getting rid of.  With any donations make sure to get a receipt of your donation.  To get an accurate assessment for the value of your donation we use the It’sDeductible app from Turbo Tax.

2.  Review Other Deductions Now To Maximize

As I mentioned above, most tax deductions don’t apply unless you are able to itemize your taxes.  If you are on the edge of being able to itemize, here are a few things you can do to get above the standard deduction:

• Pay any state taxes (cars, house etc.) before the end of the year.  
• Make extra donations to Charity.
• Take last minute Work-Related Education Courses.  As long as they are needed for your job and not paid for by your employer they are probably deductible.  

3.  Organize Medical Expenses Now

Most families are not able to itemize their medical expenses.  According to current tax law you can only deduct expenses that exceed 10% off of your Adjusted Gross Income (AGI).  For a family with an AGI $40,000 a year, that means you can only claim medical expenses over $4000.  If you had a baby this year and met your out of pocket max on insurance you may be really close to that level now.  That means… if you’ve got dental work you need, or anything else you’ve been putting off this year may be a great year to get it done.  You do need to pay for it fully in this year to be able to claim it though.

A few medical expenses that are overlooked: mileage to and from medical appointments, reading or prescription glasses or contacts, hearing aids, or the premiums on long term care insurance.  

4.  Contribute to a Traditional IRA or 401K Plan

The easiest way to pay less taxes is to save for retirement.  This also directly can help with those medical expenses, as any contribution to a Traditional IRA or 401K plan reduces your adjusted gross income.  You actually have until April 15th of next year to make these contributions, so start saving now!  

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