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Fidelity’s listed their five top tax strategies that you can use right this minute to “fix” your taxes for 2006 (not “fix” like this guy, but fix potential problems).

1. Take a look at your payroll withholding
2. Consider increasing contributions to retirement savings accounts
3. Get more energy efficient
4. Keep better records of charitable contributions
5. Consider taking advantage of stock losses

Take a look at your payroll withholding 

A lot of people overlook this tip on purpose. If you’re getting a refund, you are giving the government a free loan, but it’s a saving trick a lot of people use. As interest rates rise, people may take a second look at this “saving” strategy. It makes a lot more sense to adjust withholding when you’re giving up more than half a percent of interest.

Consider increasing contributions to retirement savings accounts

Everyone should be saving for retirement and increasing those savings whenever they can. I put it to people this way, if you can sacrifice a little bit now you won’t have to work as long when you get older. Or, the more you put into retirement the quicker you can quit your job. That argument seems to work with my peers (late 20s) that don’t want to think about being in their 60s anytime soon.

Get more energy efficient

There were a myriad of tax credits passed late last year dealing with energy efficiency, from the hybrid car credit to credits for improving the energy efficiency of your home. The easiest way to determine what products are eligible is taking a gander at the IRS fact sheet on energy tax credits. And make sure that the store/manufacturer proves you are eligible for the credit before you buy. If they tell you they’ll show you the docs after you purchase, it’s likely not eligible.

Keep better records of charitable contributions

Fidelity’s tip is all about documenting charitable donations over $250. I would posit the majority of lost charitable deductions are actually smaller dollar amounts that people never bother to write down. Donations to churches or money dropped in the Salvation Army kettles are the most likely lost deductions because people don’t note the amount donated when they make the donation and then forget to later. We keep a notecard in my wife’s purse that she uses to note any cash donations and we try to write checks for as many as we can so that we can flag donations in Microsoft Money for easy year-end recordkeeping.

Consider taking advantage of stock losses 

Harvesting tax losses to offset capital gains is a time honored tradition to reduce taxes. You can also use it to reduce normal income as $3,000 can be offset against non-capital income and the rest can be carried forward. Though, with stock markets around the world up by double digits in the past year, it may be slim pickings when it comes to tax losses. You also need to be aware that re-purchasing the stock you sold within 30 days before and after the sale will cause the loss to be disallowed even if purchased in a separate account.

These are five relatively easy tax strategies that can either reduce your tax or reduce the over or under withholding of taxes so that a surprise (good or bad) doesn’t happen next April.

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