You’ve got two months left for tax tricks. The objective is to either lower your taxable income or push it into lower brackets. One item on my list has to do with lowering estate taxes.
There are two ways to reduce your taxable income: increase your itemized deductions or reduce your adjusted gross income. A lowering of AGI is more powerful because the AGI is used to figure all kinds of benefits, like college tax credits and personal exemptions.
1. Kick up your 401(k) contribution. If withholding from your paycheck has been lower than it could be, talk to your plan administrator about making a one-time catch-up. Your annual maximum is $17,500, or, if you are at least 50, $23,000. These “elective deferrals” come on top of whatever the boss is putting in for you.
This powerful tax dodge lowers your AGI.