Terrific End-of-Year Purchases For Tax Write-offs

Many people have filled their calendars, trying to keep track of the various gatherings with friends and family during the holiday season. At this joyous and festive time of year, it is also important to keep track of your finances – in addition to your Christmas shopping budget!

To be sure, this is not a topic that most people enjoy, but you can’t ignore the inevitable. December 31 is rapidly approaching, and Tax Day will be here before you know it. Be sure to consult your CPA or tax adviser for additional suggestions and professional advice, but the following purchases may actually help to lessen that amount you will owe Uncle Sam next year.

Property Taxes and State and Local Income Taxes

Parting with your hard-earned money can be tough. Paying your annual taxes may not be your idea of a fun “purchase,” especially during the holidays, but pre-paying some of next year’s state and local income taxes or your property taxes before their actual due dates will allow your itemized deductions to be higher when it comes time to file your federal taxes.

Tax Form

Image courtesy of Philip Taylor

Vacation Homes

It’s becoming increasingly common for people to own multiple houses. Many homeowners rent that second (or even third!) house for extra income or hold onto it for investment purposes. IRS regulations state that taxpayers can deduct the mortgage interest paid throughout the year on the home that is their primary residence, but in order to receive a tax break on a second home, you must reside in it for at least part of the year, making mortgage interest on a vacation home a legitimate tax break. Doesn’t a lake front cottage sound like a wonderful real estate transaction to make before New Year’s?

Vacation home at Smith Mountain Lake

Image author owned.

If you aren’t in the market for a vacation home for tax write-off purposes, consider making January’s mortgage payment on your current home in December. This will allow you to deduct 13 months of mortgage interest from your 2013 tax bill rather than 12. (And if you already own a vacation home, consider doing the same for that house payment as well.)

Gifts to Charity

The holidays are a time that many choose to give and help others. If you have been considering making a donation to a charitable organization, it’s advisable to do so before the year’s end so that you can receive a tax deduction. Keep in mind that contributions must be made to a qualified organization, not to a particular person who is in need. If you receive something in exchange for your donation, such as a piece of clothing or admission to an event, you can only deduct the amount that exceeds the fair market value of whatever it is that you received.

Charity Santa run.

Image courtesy of Howard Lake

Eyeglasses or Personal Care Items

Many large employers offer flexible spending accounts (FSA) or health savings accounts (HSA) as a benefit to employees. Employees can then set a portion of their pre-tax income into the FSA or HSA for use on medical expenses and sometimes even childcare costs. While not a true tax write-off like the items mentioned above, you may possibly lose out on your own money if you do not take advantage of funds that are left in your FSA or HSA at year’s end. Depending on your account’s rules, this may be a great time to visit the optometrist for an exam and a new pair of glasses or to stock up on medical necessities from the drugstore.

Medical sign

Image courtesy of Keith Ramsey

Paying your taxes is never fun, but taking advantage of various tax breaks can help make the task a bit less burdensome. Who would have ever thought that a vacation home—a piece of lakefront real estate, no less!—could be a deduction?

Featured images:

Paul Moore enjoys life on the lake and not worrying about taxes – whenever he can plan ahead to reduce them.

Article written by

This article was submitted by a guest blogger.  Guest blogging provides an avenue to share a variety of different points of view with a broad audience.  It is a good way to share cumulative knowledge as well as introducing readers to a new author.  Learn more about how to become a contributor for Riches Corner.

Leave a Reply