The holiday season is full of plans and activities that make December incredibly hectic. If you are the average American, tax considerations and financial adjustments are pretty low on your holiday to-do list. However, you are not the average American — you enjoy saving money, are diligent in seeking ways to save, and excellent at following through with your plans. We can help by offering these potential money-saving tips to take before the calendar rolls over into 2016.
- Make Maximum Retirement Contributions – If you can afford to do so, max out your contributions to tax-deferred savings plans. For the 2015 tax year, maximum annual Individual Retirement Account (IRA) contributions are $5,500 with an additional $1,000 allowed as a "catch-up" contribution for taxpayers who are at least fifty years old. 401(k) plan annual contribution limits are $18,000 with an extra $6,000 catch-up allowed if you are over fifty years old.
- Don’t Forget Charitable Contributions – Make any charitable contributions before the end of the year to claim them on your 2015 tax bill — but make sure you retain your records and get appropriate receipts or notifications from the charity. Gifts of $250 or more require an acknowledgement from the receiving group.
- Adjust Withholding – If your chosen withholding level is not taking the right amount of your salary out of your paycheck to equal your taxes, adjust it as soon as possible. You cannot overcome eleven months of over- or under-withholding, but correct what you can.
While it is enjoyable to get a big refund, it is not economically smart. Your annual withholding should equal or be slightly below your tax bill. If you have extra withheld in order to get a refund, you are just giving the government the interest on your money when you could be collecting it instead. However, make sure you are withholding enough to avoid an underpayment penalty.
- Accelerate/Delay Deductions and Income –