1. Check Your Withholding
Make sure you are withholding enough income taxes from your wages. A little late for this year, but good for next year.
2. Consider Paying 2021 Bills Now
If you plan to itemize your deductions this year accelerate them from 2021 to 2020. Only certain deductions can be accelerated and deducted. Also, few people are itemizing these days.
3. Reap the Tax Harvest
Sell your stocks that will generate a capital loss. Be careful. First, capital losses reduce preferentially taxed (lower taxed) capital gains. Low-income earners may not pay anything on capital gains. You can’t do better than that. Second, you can deduct only $3,000 of capital losses above your capital gains. So, do not generate losses that you can’t use anytime soon.
4. Watch for Capital Gains Distributions
Many mutual funds distribute gains out in December.
5. Max Out Your Pre-Tax Retirement Savings
Always good advice if you can afford it!
6. Use Your Side Hustle to Boost Retirement Savings
Open a solo 401(k) plan on any self-employment income you have.
7. Open a Donor-Advised Fund
Putting money or other assets, such as stocks or personal property, in a donor-advised fund allow you to deduct the entire amount in the year rather than later when you dole it out to the charities of your choice.
8. Max Out Charitable Donations if You Itemize
If you itemize you should consider a bunching strategy in either even or odd years.
9. Donate Cash to Charity if You Take the Standard Deduction
Even non-itemizers can deduct up to $300 of charitable contributions this year.
10. Transfer IRA Money to Charity
Taxpayers who are 70 1/2 or older can transfer up to $100,000 from a traditional IRA tax-free to charity each year. This can count towards their RMD. Of course, this year the RMD’s have been waived.
11. Consider a Roth Conversion
This can be a savvy strategy if your income is down this year.