How to minimize your taxes in 2021: 10 steps you can take in a couple of days

This is the last week of the year, which means this is your last chance to save significant money on taxes. Donations to charity or changes in investment will save thousands of dollars in tax liabilities, reports USA Today.

Here are 10 year-end tips courtesy of CPA TurboTax and tax expert Lisa Green-Lewis:

Deferred bonuses

If your hard work has paid off and you expect a bonus at the end of the year, Green-Lewis said, that extra money could move you into a different tax category. Then the amount of taxes you have to pay will increase. To avoid this, you can postpone earning additional income until early next year.

If your boss can pay you the bonus in January, you will receive your money around the same time. However, they will not be part of your taxable income in 2021.

Speed ​​up royalties and delay earning income

There are several tax deductions that are taken into account in the year in which you pay them. For example, if you own a home, you can deduct the interest on your mortgage. If you make an additional mortgage payment on December 31st, you will be able to claim interest on that payment in 2021 returns.

Before doing this, please be aware that according to Tax Cuts and Employment Law passed in 2018If you purchased a home after December 15, 2017, you can deduct up to $ 750000 in total mortgage interest instead of $ 1000000 for homes purchased before that time. This was reported by TaxAct, an American company that develops software for tax reporting.

Donations to charity

If you list your deductions separately, you can help someone in need. You can take advantage of a tax deduction for non-cash and monetary donations made by an official charity.

Make a donation by December 31st so that they will be taken into account when calculating your taxes. If you donate using credit card, you do not have to pay it in 2021 to get a deduction.

If you volunteer for an official charity, keep in mind that you can also deduct the mileage (14 cents per 1,6 km) spent on charity services.

Under CARES, even people using the standard deduction can benefit from a deduction for monetary donations of up to $ 300 made to a 501 (c) (3) organization. The amount doubles to $ 600 for married couples filing a joint return.

Keep this in mind because about 90% of taxpayers now require a standard deduction. This means that they cannot use any other means of deducting charitable contributions.

On the subject: New York launches guaranteed income program: $125 million will be paid to people

CARES has temporarily removed the limit on the amount of money you can deduct when you pay. Deductions for donations are generally capped at 60% of your adjusted gross income.

Get the most out of your retirement.

Another great way to reduce taxable savings income is to contribute to a 401 (k) or traditional IRA. If you are self-employed and contribute to the SEP IRA, you can contribute up to 25% of your net self-employment income, or $ 58000 for 2021.

Spend FSA

If you have a contingency savings account (FSA) and have money left in it, make frequent visits to your doctor. The old “use it or lose it” rule no longer applies. But you can only transfer $ 550 to your FSA 2021 account at the end of the year.

Buy high, sell low

Do you have an investment whose value has dropped? Did you know you can lock in your losses and use them to offset investment winners? According to Green-Lewis, for this you need to sell unprofitable investments. If your losses exceed your profits, you can apply $ 3000 of those losses to your recurring income. Any balance will carry over to the next tax year.

Make changes to W-4 hold

You may not have had the tax result that you expected in 2021 due to changes in tax laws or events such as having a child, raising or lowering wages, losing a job, or getting a new one. If so, now is the time to adjust your W-4 withholding and resubmit it with your employer.

Do not forget about the "credit for other dependents"

Do you support your parents and grandparents? And a loved one? If you care and they fall into the category of non-child dependents, be sure to take advantage of the new Other Dependent Credit. This can reduce the taxes you have to pay, based on costs incurred, by up to $ 500.

Collect receipts related to property taxes or large purchases.

Do you pay property tax on your home or state income tax? Paid a lot of sales tax on a large purchase? You can deduct state and local property taxes, income tax, or sales tax up to $ 10. In the past, these taxes were generally not fully taxed.

Sign up for classes

Pass the course for career advancement or professional development is a great way to reduce taxes. Paying tuition for the next quarter before December 31st can give you up to $ 2000 tax credit on your tax return with a lifetime tuition credit.