Checklist: 5 Top Year-End Tax Moves to Make—Today
As 2014 winds to a close, your to-do list likely includes figuring out where you’ll be on New Year’s Eve and what to wear to the festivities.
Although it might not seem quite as fun, “save money on taxes” should also be on that list because taking a few simple steps now could potentially reduce your tax burden in 2015.
Many of the tax breaks that were set to expire at the end of 2013 were extended for another year, thanks to the passage of the Tax Increase Prevention Act, says Michael Pantori, a senior tax manager at CBIZ MHM, a national top 10 accounting and professional services provider.
But these deductions may last only through the end of 2014, so you have to act fast.
Here are five moves you should consider making before ushering in the New Year:
Max out your retirement accounts.
Reduce your taxable income for the year by putting as much as you can into your 401k and IRAs. You can contribute up to $17,500 to your 401k and as much as $5,500 toward your traditional and Roth IRAs ($6,500 if you’re age 50 or older).
Donate to charity.
Charitable gifts are tax deductible (if you itemize your deductions), so now is a great time to consider donating to your favorite causes. Just keep in mind that the I.R.S.’ date of delivery rule means the recipient must receive your donation (or it must be postmarked) by December 31.
Make an early mortgage payment.
If you make your January mortgage payment by December 31, you can deduct the mortgage interest on your upcoming tax bill. You can also pay your property taxes early to get another deduction.
Use up your flex spending.
A new rule allows employers to let their employees roll over up to $500 in their flex spending accounts from one year to the next. But if you’ll be ending the year with more than that left over—or if your employer hasn’t updated its policy—you should use up the remaining funds so you don’t lose them.
Consider stocking up on extra contact lenses or squeezing in a dental checkup. (Here’s a list of all allowable purchases from the I.R.S.)
Pay college costs ahead of time.
You or your child’s tuition and fees for the spring semester may not be due until January, but if you pay the bill before year’s end you may be able to claim the American Opportunity Tax Credit on your 2014 tax return.