We’re a few weeks into the New Year, and that can only mean one thing: Tax time is here. As tax forms start filling the mailbox, you’re probably thinking about how you can reduce your tax bill this year while still getting a leg up on next year’s bill. While ideally you would have thought about your taxes before the end of 2015 so you could make decisions then that would lower your tax burden, there are a few things you can do now to lessen the sting of writing that check to Uncle Sam — and we aren’t talking about random deductions that may or may not be allowable by the IRS.

As always, talk with a professional tax advisor before trying any of these techniques.

1. Give to Charity

You already know that you can deduct charitable contributions of cash and property on your taxes. At this point, it’s too late to make a donation and have it count toward your 2015 tax bill (that had to be done before December 31) but you can take steps now to increase your giving next year and enjoy bigger tax benefits now.

One way to do so is to set up a donor-advised fund through your brokerage. You’ll need at least $5,000 to do so, but when you establish such a fund you can enjoy immediate and ongoing tax benefits. Not only do you get to avoid paying capital gains taxes on the appreciated assets in the fund, but you’ll be able to support your favorite charities for years to come using the money in the fund.

Of course, planning your charitable donations throughout the year can also help you come tax time. While most people know that they can donate their old cars to score a tax deduction, you can also donate boats and other big-ticket items. If you’re thinking about getting rid of the family vessel this year, talk with your accountant about the tax advantages of donating it instead of selling it. In some cases, the deduction you get from your donation will be worth more than the cash you earn in a sale.

2. Pay Big Expenses in Advance

Planning out your budget for the year in advance can actually have some major tax advantages – especially if you are expecting to have a big increase in income. By paying certain expenses in advance, you can maximize your deductions for the following year. Again, this requires planning ahead; i.e., it’s too late now to pay ahead to reduce 2015 taxes, but if you budget smartly, you can maximize deductions. Some of the expenses you can pay in advance include:

• Mortgage payments. Not only does making an extra mortgage payment each year shorten the amount of time you pay on your house (a single extra payment a year can trim up to five years off the term!) but you also maximize your mortgage interest deduction.
• Tax payments. Paying your property, and estimated state and local taxes, in advance allows you to deduct them on your tax bill for that year.
• Professional subscriptions and dues.
• Tuition or student loan bills.

Again, this strategy works best if you expect to remain in the same tax bracket for the following year. If you’re going to see a major increase in income, you’re better off to defer payments into that tax year to prevent a larger bill later.

3. Start a Side Business

Starting a side business has many benefits. Not only can you earn an income to help pay down debts, but a legitimate side business can help reduce your tax burden. Selling your handmade items on Etsy, doing freelance work on the side, even signing up with a multilevel marketing company are all legitimate businesses in the eyes of the IRS, meaning you can deduct expenses from your income.

The catch, of course, is that you have to be able to demonstrate that your business is real, and that you’re making a serious effort to turn a profit. Otherwise, your “business” will be classified as a hobby and you cannot take any deductions. Set up your business properly, with a tax identification number and separate bank account, and keep meticulous records of your earnings and expenses. Who knows? Your side business could take off and become your primary source of income, creating a whole new set of tax consequences.

Maximizing your tax deductions requires planning in advance and making smart choices throughout the year. Don’t wait until the last minute and then kick yourself for missing potential deductions. Talk with your tax professional to develop a strategy for next year, and reduce your future tax burden.

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