12/26/2020
2020 Year End Tax Saving Strategies
1. Reduce your tax liability by prepaying deductible expenses such as Charitable Contributions and Mortgage Interest.
2. Charitable Donations : Special COVID rules for 2020 allows you to lower both adjusted gross income and taxable income by donation to charity. Check IRS website to see if your charity is tax exempt.
3. If you have capital gains this year try the following:
a. Sell securities with losses to offset the gains – if market conditions justify it.
b. Identify worthless securities and bad debts take steps to ensure that the losses are deductible in the current year, by having the proper substantiation.
c. Use a bond swap to realize losses. This swap allows you to purchase similar bonds and avoid the wash sale rule while maintaining your overall bond positions.
Remember to avoid wash sale rules. Loss recognition is disallowed if the same or substantially identical security is purchased 30 days before or after the sale of the security that created the loss.
4. Buy business equipment take advantage of IRC Sec. 179 deductions and bonus depreciation available this year that can potentially allow you to expense the full amount of the equipment.
5. Avoid underpayment penalty buy paying fourth quarter estimates due January 15 and increase the payment amount, if necessary.
6. Maximize your contributions to your retirement accounts and take advantage of the best plans available to you prior to December 31.
7. Talk to your company and check if you qualify for defer salary or bonus program.
