There is still time to reduce tax liability

reduce_taxThe end of the year is quickly approaching, and tax time is lurking around the corner. One of the most critical components to financial planning is reducing your tax liability for individuals, as well as business owners. It is easy to overlook potential tax deductions or tax credits. It is time to brush up on your tax guideline knowledge before the year ends. There is time to still take advantage of some of these strategies.

One of the simplest ways to reduce your gross income is to increase your retirement contributions. Up to $18,000 dollars of pre-tax dollars can be contributed to a 401k. This will reduce your gross income, and possibly your tax bracket. For individuals over the age of 50, that number increases to $24,000. This can significantly reduce your tax liability.

Dividend and interest payments are taxable sources of income. However, those payments can be transitioned to other tax shelters like a tax-exempt bond fund. Selling off investments can also decrease total tax liability each year.

Tis the season for giving, and do so before 2015 ends. Documented charitable donations can be deducted each year. The donations can be in cash or household items. Keep in mind that any donation which exceeds $250 needs a receipt documenting the donation. There are some limitations of donations that exceed 20% of your adjusted gross income.

All of these strategies can be used to reduce tax liability throughout the year. It is always a great idea to utilize the assistance of professional tax preparation services to ensure the accuracy of tax deductions or tax credits. In addition, this could also be a great time to analyze current investments, and ascertain if there are necessary adjustments which should be made during the approaching year.