Year End Tax Saving Tips

Ok! So it is year end. Everyone is in festive moods. Great! Lets have some fun with friends and family. Sit around the table and talk about all the crazy things that happened this year. While doing so lets also discuss about taxes, tax saving tips. Remember we have until December 31st to make adjustments and be wise about saving taxes.
First thing we need to do, of course, is to see how we fared so far in the year. Since it is almost end of year, any recent pay stub should tell you how you are faring so far. Check your pay stub to see your income. Get a rough estimate of taxes you gonna pay. You can find the tax table here. Once you got that, here are some of things you can do to save taxes.
Increase your IRA contributions
I know bunch of folks who feel that contributing to retirement is a waste of money. In fact I met few people who think they wont live long enough to see the fruits of 401K. Well, whatever reason they give, it ultimately boils down to the fact that they want to see hard cash right now in their hands rather than years later. Few people think they wont have enough bank savings if they put the funds in 401K. It might be so, but you have to check your assumptions with the facts.
Check your savings/checking accounts and see how much you saved over the year. If the amount is 3 times your monthly salary, it is excess for a single person, and if it is more than 5 times your monthly salary, it is excess for a family person. Money lying around in bank is almost useless money. As Warren Buffet says "cash is probably the worst investment." Contribute part of that savings to your IRA, let the money grow. More often than not, your employer matches the contributions and hence you get free money. Contribute something, a little, whatever you are comfortable with at least to get that free money. Dont you go buy clothes from Macy's if they have BOGO offer. So why is this different? Put money in 401k and save taxes, grow your money.
Clean up your closet
How on earth would cleaning your closet help you reduce taxes? The trick lies in what you do after you clean up. I am sure you accumulated bunch of clothes over the year and you no longer wear few of them, or you feel they are old and hence dont use anymore. Most people just throw them into dumpster. Such a waste. There are people who might actually think that those clothes are luxury. You may want to consider donating them to charities like Goodwill who would donate it to people in need. You would indirectly be helping community, reducing waste, be more environment friendly and get tax deductions on your contributions. Make sure you get a receipt from them. I did this exercise last year and guess what why contributions came up to? A whooping $463. I never realized when I donated, but after a while when I was filing my taxes thats how much I got after calculations. I donated my old clothes, shoes, stereo set, key board, some electrical appliances, books etc.
Consider volunteering work
Volunteering not only gives tremendous personal satisfaction of helping community but can save taxes for you. Any work that you do for volunteering is tax deductible. Any mileage that you drive for volunteering is tax deductible. There is a charity which arranges for rides for senior citizens who cannot drive themselves. Think of them as your grandparents and give them a ride to the grocery store, airport or wherever they want to go. It is very very refreshing and you get to hear their amazing stories.

Consider selling your investments for loss
This might sound crazy to you and of course this is not applicable to all. If you have an investment portfolio and you see you did well in couple of places and not doing so well in other places and you doubt your recovery, may be it is time to sell those and take losses. All losses are tax deductibles. You can compensate the gains you made on other parts with the losses.

I deliberately left out ideas like claiming job search expenses, student loan interests, etc since there is not much you can do now. These can anyway be taken as tax deductibles even though you dont do anything now. I will summarize tax preparation check list in another post some time soon.
If you have a tax saving tip, do share it with us, so that we can grow as friends together and get maximum tax benefits out.
Happy holidays folks!