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Accelerating deductions/postponing income

If you'll be in a lower tax bracket next year, you may wish to accelerate your deductions into this year and postpone your income into the following year.

You can accelerate your deductions into this year by:

  • Making next year's charitable contributions this year instead
  • Prepaying deductible interest
  • Paying estimated tax installments in December instead of January
  • Accelerating capital losses
  • Taking advantage of flexible spending accounts, Archer MSAs, and cafeteria plans
  • Making January's alimony payment in December
  • Prepaying next spring's college costs in December (if it qualifies you for added Hope/Lifetime Learning credit or deduction for qualified higher education expenses)

You can postpone your income into the following year by:

  • Delaying the collection of any debts that you are owed
  • Deferring compensation
  • Deferring year-end bonuses
  • Delaying the exercise of incentive stock options (ISOs)
  • Transferring funds to bank certificates and Treasury bills in order to delay tax on the interest
  • Setting up a tax-deferred annuity or retirement account
  • Deferring the sale of capital gain property, or taking installment payments rather than a lump-sum payment
  • Postponing receipt of distributions that are over the required minimum from retirement accounts
  • Increasing your contributions to your company's 401(k) plan or other tax-deferred plans