In the final months of the year, there are only a few options left to you to lower your taxable income and reduce your tax liability. This is the #1 topic for financial planners assisting their clients. You may utilize any of these options at least until the last day of the year.
Do you have any junk lying around?
…and by junk we mean any investments that you could sell for a loss. If you have more capital losses than gains in the year, you can use up to $3,000 of your capital losses to offset your ordinary income. Any remainder over $3,000 can be carried over to the next year (Capital Loss Carryover).
Defer income until next year
Are you retiring this year and expect a large severance or bonus? Have your employer pay out the bonus or severance in January of next year instead of in December this year to reduce your current year taxable income. If you are self-employed, defer payment on a large project until next year. WARNING! You can set yourself up if you suddenly find yourself making more money than planned next year and have deferred any income. TALK TO A PROFESSIONAL, FIRST.
Pad your nest egg
Kick your retirement nest egg up a notch by meeting the maximum IRA contribution of $6,000. You may contribute up to $19,500 toward your employer sponsored 401(k).
*If you are 50 or over, you are eligible for a catch-up contribution of $6,500 in 2020 for the 401(k) and an additional $1,000 for the IRA. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits
Do something for others
Make a charitable contribution to a recognized nonprofit. The higher your tax bracket, the more your charitable contribution dollars are worth as a deduction. Consider bundling your charitable contributions into one year.
Invest in your health
By contributing to a Health Savings Account (HSA) you can probably reduce your tax bill and use these pre-tax dollars to pay for a wide variety of medical care. To qualify for an HSA, you’ll need to be enrolled in a high-deductible plan, not be enrolled in Medicare, and not be claimed as a dependent. https://www.daveramsey.com/blog/hsa-contribution-limits
The Number One way to ensure you pay the least and get the most
Have a professional advise you and prepare your taxes.