8 Last-Minute Tax Tips Before the Year Ends

Before we know it, 2020 will be over, and while that’s something many of us may be inclined to celebrate, it also means the clock is ticking on the tax front. Though 2020’s taxes won’t be due until April of 2021, the moves you make in the coming week or so could shave serious money off your IRS bill. Here are a few last-minute action items to check off your list.

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The more money you contribute to a traditional retirement plan, the less income the IRS can tax you on. If you’ve yet to max out your IRA, now’s a good time to put in some extra cash (though if you have a 401(k), it may be too late at this stage of the year to make that payroll change).

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Being more charitable can pay off from a tax standpoint. If you have money to spare, donating some to a registered charity before the end of the year could give you a larger deduction to claim on your tax return. And this year, thanks to the CARES Act, you can claim up to $300 in charitable donations on your taxes even if you don’t itemize.

If you have stocks that are underperforming in your portfolio, unloading them before the end of the year could help you reduce your tax bill. Capital losses can be used to offset capital gains, which means if you’ve sold stock this year and made a profit, you can benefit from this strategy. And if your net loss from selling bum investments exceeds your capital gains, you can use up to $3,000 to offset ordinary income.

If your December mortgage payment is due Jan. 1 of 2021, paying it a day early could help lower this year's tax bill. That's because the mortgage interest on that payment will count for 2020 purposes instead of 2021.

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If you plan to itemize your 2020 taxes, you may be eligible to deduct medical expenses that exceed 7.5% of your adjusted gross income for the year. Therefore, pushing up medical appointments to late December could give you a higher tax write-off. That’s also a good way to use up any funds you may have lingering in your flexible spending account.

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If you’re eligible for a health savings account and haven’t maxed it out, now’s a good time to pump a little extra money into it. Like traditional retirement plans, the higher your contribution, the less income you get taxed on for the year.

Just because you earn money in 2020 doesn’t mean you need to get paid for that work this year. If you’re due money for freelance projects, it could pay to hold off on billing your clients until Jan. 1 so you’re paid next year -- especially if your 2020 income is already higher than anticipated and you’re worried about a huge tax bill this year.

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If you’re self-employed or own a business, you’re allowed to deduct expenses that help you earn money, like office supplies or equipment specific to what you do (for example, cables and modems if you’re an IT consultant). Buying some of those items this year versus waiting till next year will give you a higher deduction for 2020.

Nobody wants to pay more tax than necessary. Make these moves quickly, and you may find that you owe the IRS a lot less than you think when you file your 2020 taxes.

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