Towards the end of 2020, it is time to start thinking about tax movements that will help reduce your overall tax burden, especially since most taxes are based on actions you have taken. With the end of the year fast approaching, here are some money-saving and housekeeping measures to consider.
Give to nonprofits
Donating to a charity doesn’t just help a good cause. It offers a tax deduction for itemizers. As long as donations go to an organization, a taxpayer can now deduct monetary donations up to 60% of adjusted gross income, which is a 50% increase. For property donations, the deduction is limited to either 30% of your adjusted gross income using the fair value of the property or 50% of your adjusted gross income if you are determining the amount of the deduction on a cost basis.
Estimate your tax bill now
Instead of waiting for your accountant to figure out what your tax bill might be for that year, use the IRS withholding tax estimator to estimate how much you owe or will include on your tax return. The appraiser also gives you a suggestion for your future withholding.
Freelancers or independent contractors may want to consider billing clients for their work. Generally, if individuals delay a settlement, they will not receive any income. This would delay the payment of income taxes for another year.
Check Your Income If You Are A Small Business Owner
For the self employed, it is a good idea to sit down before the end of the year and review your business income. Subtract your deductible expenses from your total income to find your net taxable income, then forecast the final months of the year to get a rough idea of what you might owe or receive in return. If it looks like you owe something, you can start making estimated payments now – or make higher estimated payments to make up the difference if you’re currently making estimated payments.