If you’re worried that you’ll owe large amounts of taxes this year, it’s not too late to take charge of your taxes.
According to Fidelity, you can make five strategic moves to potentially reduce the taxes you owe.
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Itemize Your Deductions
Depending on your deductible expenses, you might be able to lower your tax liability by itemizing your deductions on your tax return. You can potentially deduct medical expenses, state and local taxes, charitable contributions, the interest on your home mortgage and losses you experienced that were caused by a federally declared disaster.
Keep in mind that there are often limits and restrictions on what you can deduct, so in some cases, you might get greater value by choosing the standard deduction.
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Consider Bunching Charitable Contributions
You can strategically plan your charitable contributions to maximize your tax deductions during certain years. This technique, called bunching, refers to concentrating your contributions in a certain tax year, then skipping making charitable deductions in the next year.
If you know your income will be unusually high in one year, such as if you received a large bonus, you might bunch your charitable contributions and claim itemized deductions to reduce your tax liability during that year.
Take Advantage of Education Tax Breaks
Depending on where you live, you may be able to deduct part or all of the contributions you make to a 529 college savings account during the year. According to TIAA, a 529 account grows over time and you can oversee the account and choose the beneficiary. The IRS doesn’t set any annual limits to how much you can contribute, but there are lifetime contribution limits that are defined by your plan and your state.
Investo offers a map that outlines the different deductions allowed by each state. Some states allow you to deduct up to a certain amount or percentage of your contributions. Other states, like New Mexico and South Carolina, allow you to deduct the full value of your 529 contribution from your taxable income.
Maximize Your Retirement Contributions
Contributing to your retirement accounts can help maximize your savings, plus it may reduce your taxable income. According to Fidelity, contributions to a traditional Individual Retirement Account (IRA) may be tax-deductible and in most cases, the contributions you make up until the tax filing deadline can count toward your prior year’s contributions. If you make contributions up until April 15, 2026, those contributions could count as 2025 contributions, reducing your 2025 taxable income.
Defer Your Income
If you’re doing gig work or have freelance income, you can strategically bill for that work to push some of your income off so that it applies to your next year’s taxes. Rather than billing clients right in the end of 2025, consider putting off your billing until early the next year, so that income counts toward 2026. If your 2025 income is close to moving up into the tax bracket, putting off some billing could help keep you in the current bracket, so you remain at the lower tax rate.
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This article originally appeared on GOBankingRates.com: Sweating Over Taxes? Fidelity Says Make These Essential Moves Now
