If you expect to be in the same or a lower tax bracket next year, look for ways to shift some of your income and the taxes on it into 2016. Although certain types of income, such as your paycheck, may be impossible to shift into next year, you may be able to:
- Control when you bill clients if you are self-employed.
- Hold off withdrawing more than the required minimum from your retirement accounts until after December 31.
Of course, if you expect to be in a higher tax bracket next year, shifting income into this year is generally the way to go because it enables you to pay taxes on it at a lower rate.
If you itemize deductions and expect to be in a different tax bracket next year, consider shifting some of your deductible expenses into the year that you will be in the higher tax bracket so that you get a greater reduction in taxes for your deduction. For example, if you are currently in the 25% tax bracket and expect to be in the 28% tax bracket next year, a $10,000 deduction will generally reduce your taxes by $2,500 this year or by $2,800 next year. Deductible expenses that you may be able to shift include:
- Charitable contributions.
- Medical services and equipment.
- Mortgage interest and real estate taxes.