Tax Savings Ideas
DONATIONS. Donate cash to charity or clothing or household items to the Deseret Industries, Salvation Army, etc. before the end of the year. Make sure you get a receipt for your donation.
FLEXIBLE SPENDING ACCOUNTS. If your employer provides a flexible spending account for medical expenses or child care, take advantage of it if you know you will be paying out-of-pocket expenses. Child care credit on your tax return could be less than the benefit of a flexible spending account since it's normally a 20% credit and you may be in the 25% tax bracket. For medical expenses, the money you would normally pay for prescriptions and co-pays can be tax free without getting over the 7.5% threshold of medical expenses on your itemized deductions.
If you have a flexible medical spending account, make sure you schedule dentist and doctor appointments, get new glasses, refill prescriptions, etc. before the end of the year. If you don't use the money in the account, you lose it. Several FSA's have a grace period until the middle of March of the next year to use your money so plan accordingly.
HEALTH SAVINGS ACCOUNTS. If you have a high-deductible health plan, sign up for a Health Savings Account (HSA). The amount you put into the account is deductible and the income from the account is not taxed. Distributions from the account to pay for medical expenses are not taxed.
TUITION. If you've paid college tuition this year for yourself or a dependant and have savings bonds, you may want to cash some to take advantage of the non-taxable interest if they are used for education.
EDUCATIONAL SAVINGS ACCOUNTS. You may want to contribute to a Utah 529 educational savings account to help your children or grandchildren. The amount you contribute is deductible on federal and state income tax returns as long as the money is used for higher education expenses. The earnings from the account is not taxed on Federal or State returns.
REAL ESTATE TAX. If you owe back-taxes on real estate, pay them before the end of the year for an increased deduction.
DEDUCTIBLE EXPENSES. Charge deductible expenses on a credit card if you are short on funds. Medical bills, charitable contributions, etc, are still deductible if paid by a major credit card. Store cards are excluded.
WITHHOLD MORE. Increase your withholding from your last few checks for the year if you have underpaid your taxes. This will help out if you are behind on your withholding.
MEDICAL APPOINTMENTS. Try to schedule major surgeries and other large medical expenditures in one year. This may get you over the 7.5% limit and allow you to take a deduction you wouldn't otherwise be able to take. If you still have funds in your FSA account, this would be a good way to use up the funds.
SALES TAXES. You may be able to deduct sales tax if it is higher than the state income tax you paid for the year with your W-2s. You must itemize deductions to claim the credit. This is an either/or situation. You can't claim both sales tax and state income tax as itemized deductions.
STOCK LOSSES. If you sold stock or mutual funds for a gain during the tax year, you may want to sell a loser stock or two by the end of the year to offset the gain. You may claim $3000 in investment losses per year.
STOCK CONTRIBUTIONS. Plan to make cash and stock charitable contributions before December 31st for a deduction. Remember to obtain a receipt for any cash contributions you make or they won't be deductible. If you own stock that has appreciated and you have held it more than one year, you could donate it to a charity and claim the market value, rather than the amount you paid for the stock.
TRADITIONAL IRAs. Make a traditional IRA contribution if you have earned income up to the amount of $5,000 for those under 50 years old or $6,000 if over 50 years old. If one spouse does not qualify and has a non-working spouse, a contribution for the non-working spouse may be able to be made. The contribution can be deducted from gross income so you pay less tax.