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As the end of the year approaches, the following simple tax tips can keep taxes as low as possible.
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- Charitable gifting. Charitable donations may be used as deductions against your taxable income. Â However, all charitable donations must be supported with written receipts unless under $250 in which case a bank record is sufficient. Â Also, donations of services or your time are not tax deductible.
- Gifting in general. Each individual may gift up to $13,000 per year to an unlimited number of individuals without filing a gift tax return. Â Any gifts over $13,000 per year reduce the lifetime gift tax exclusion of $1,000,000. Â Once the lifetime exclusion is exhausted, gift taxes must be paid.
- Pay property taxes early. Real estate taxes are deductible. Â For taxes due early next year, if you pay them this year, you can use them as a deduction.
- Sell poor performing securities. Losses can be offset against gains reducing any capital gains. Â Excess losses can be deducted, but only up to $3,000 per year.
- Increase retirement plan contributions. Retirement plan contributions reduce taxable income.
- Increase business expense purchases. Purchases of business equipment, supplies, etc., can be used as taxable deductions.
- Maximize necessary medical expenses. The purchase of prescription drugs in bulk, eyeglasses, health insurance premiums, and doctor bill payments can be used as deductions. Â However, medical expense deductions are limited to the amount exceeding 7-1/2% of your adjusted gross income and only can be used if you itemize your deductions.
Following any of the above-described recommendations should help reduce your tax liability or increase your refund next spring.
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Simple Year End Tax Tips
Joseph Balmer manages the Probate, Trust and Estate Administration department at Dayton, Ohio, law firm, Holzfaster, Cecil, McKnight & Mues, and has been certified by the Ohio State Bar Association as a specialist in Estate Planning, Trust and Probate Law since 2006.
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