You may be focused on family gatherings, hot chocolate, and ugly sweater parties, but make sure you also take a few minutes to evaluate your end of year tax strategy. There are a few more things that you can still do before the end of the year to make sure that you’re getting the most bang for your buck. The following tax tips could save you money.
Once the clock strikes midnight on Dec 31, you usually can’t add to your employer retirement accounts for that year. If you get a bonus in December, see if you can direct some of it to your 401(k) to save even more.
If you contributed to a Roth IRA for 2014, double check that you didn’t exceed the income limitations. If you made too much income to contribute, it’s easier to correct the contribution sooner rather than later. If you wait too long or claim that you didn’t know, you could run into penalties from the IRS.
Some employers let you use this through an extended period, but some don’t. Make sure you know when your deadline falls so that you don’t lose it with the “use it or lose it” rule.
If you plan to itemize deductions on your tax return, see if there are any other actions you can take to increase the itemization.
If you usually make a charitable donation in January and you can afford to make it now, go ahead and do it in December. If you only have enough deductions to itemize every other year (and this is the year), go ahead and pay your property taxes this year to be able to claim them on this year’s itemized deduction.
If you have a taxable investment account (not your retirement accounts), look to see if you have any holdings that have lost money and that you’re not interested in holding long term. Maybe you bought a stock on a friend’s tip and it’s done nothing but lose money. If you sell this stock, you could use the loss to cancel out a gain in another investment.
If you don’t have any gains, you can claim up to $3,000 in capital losses per year.
If you’ve reached your medical insurance deductible and know you need to get a procedure or check-up done, see if you can fit it in before your deductible resets at the beginning of the year.
Start gathering together all of your receipts, including those for charitable deductions, business expenses, medical expenses (if you’ve incurred substantial ones this year), amounts paid on educational expenses, and amounts paid for estimated taxes. Ask for a checklist or tax organizer from your tax preparer so you can start checking off statements as they become available.
If you take the time to take one last look at these year end tax tips and your overall strategy, it could save you money and get you an A+ with your tax preparer.
For more information on the basics of how taxes work, and how to make the tax code work for you, read Having A Good Relationship With The IRS.
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