Act now to manage the tax bill that will be due next year

By Sarah Skidmore Sell
AP Personal Finance Reporter

As the end of the year approaches, it’s time to think about taxes.

The tax season may seem far off, but this is the time of year to make some moves to help your tax bill come spring. Here are a few easy steps to consider taking soon:

DEDUCT

Contributing to charity is a great way to help others with a gift and yourself with a tax deduction. Remember to keep any paperwork to back up your donation.

However, charitable contributions will only help out on your taxes if you are itemizing in your taxes and those deductions exceed the standard deduction, Fidelity Investments reminds taxpayers. The standard deduction for 2016 is $6,300 for a single taxpayer, $9,300 for head of household and $12,600 for a married couple filing jointly or a surviving spouse.

Charitable deductions are limited up to 50 percent of your adjusted gross income.

SAVE

Pre-tax contributions to a retirement accounts, such as a 401(k) or 403(b), could reduce the amount of tax you owe. You have until Dec. 30 to increase the amount you set aside in such accounts.

The maximum you can contribute to a 401(k) for 2016 is $18,000, unless you are age 50 or older, which allows you to contribute up to $24,000.

If you want to set aside money in a traditional IRA or a Simplified Employee Pension IRA, you can also get tax breaks and have until April 15 of next year to do so and apply it to your 2016 taxes.

The maximum IRA contribution for this year is $5,500 for taxpayers under 50 and $6,500 for those 50 and older. SEP contributions by the self-employed are limited to $53,000 or 25 percent of eligible income, whichever is less.

SELL

Consider the popular tactic of “loss harvesting,” which is selling investments such as stocks, bonds and mutual funds to realize losses. You can then use those losses to offset any gains you may have realized during the year, H&R Block suggests.

If your losses are more than your gains, you can apply up to $3,000 of the excess loss to wipe out other income. If your losses are more than $3,000 you can carry over further losses into subsequent years.

Tax-loss harvesting needs to be done by Dec. 30 because this is the last business day of the year.