10 Tips For Lowering Your Taxes

This list of ten tips to reduce taxes was published nearly a year ago, but they’re still relevant, and we thought now would be a good time to share them before Kiplinger releases its new “10 Ways” list later this month. Among the tips: make sure you load up your retirement accounts and flexible spending accounts, and remember that the government gives you a 2 ½ month grace period on reimbursing yourself from an over-funded flex account.

Another tip is to donate appreciated assets instead of cash to a charity.

Let’s say you have $1,000 worth of mutual fund shares that you bought more than a year ago for $500. If you sold those shares, you’d owe $75 in tax on the profit even at the special 15% capital gains rate. But if you donate those shares, the charity gets the full $1,000 (it doesn’t have to pay tax on the profit when it sells), you avoid that $75 tax bill, and you still get to deduct the full 1,000 bucks. It’s a win, win, win situation. (This only works when the assets are held in a taxable account, not an IRA or other retirement account.)

What if you don’t want to part with your investment? Give it away, anyway, and use the cash you would have donated to re-invest. The maneuver is perfectly legal and simply wipes out the tax bill that’s built up so far.

And no, it doesn’t work if the investment has lost money—”You would be better off selling the stock, making a tax-deductible contribution of $400 in cash to the charity and claiming a $600 capital loss.”

“Ten Ways to Lower Your Tax Bill” [Kiplinger]
(Photo: Getty)