2014 is quickly coming to a close. Before ringing in the New Year, take December to round out some quick and easy tips to lower your tax obligations and even boost your tax refund. And who doesn’t want more money?
So before we put a cork in this year, get your tax to-do list ready — and let’s check off these 8 items.
1. Start gathering forms, and receipts. Start gathering receipts for deductible expenses and sources of income for the past year so you don’t leave anything out when you sit down and prepare your taxes. Pro tip: Understand which tax forms you will need, and keep a checklist to keep everything straight. This will help keep your sanity when you sit down to file your taxes, trust me.
2. Donate to charity. Take December to weed through your clothes, furniture, and household goods to give back to a qualified charitable organization. Donating to those in need will leave you with a warm feeling inside, as well as a possible deduction. For non-cash and monetary donations, make sure you keep your receipts from the charitable organizations. Mileage (14 cents of every mile) driven to charitable service is also tax deductible. TurboTax Its Deductible will accurately value and track your yearly-donated goods. Make these donations count on your taxes by donating by December 31st. Pro Tip: If you make a donation by credit card, you do not have to pay it off in 2014 to receive the tax deduction.
3. Push back your bonus to January. You have put in some hard work this year and now comes time for your holiday bonus! Taxes will be applied here, and this extra income may bump you to a higher tax bracket. Pro Tip: If you do not need the money immediately and your boss is willing to pay it in January — it might be worth pushing your bonus off a year. You still get to enjoy your rewards come the New Year, but do not have to pay the additional tax until April 2016.
4. Look to the future and max out your retirement savings. In some situations, employers will allow you to play catch-up on your 401(k) or 403(b) plans. Check to see if you can increase your deduction on your last paychecks of the year. Putting money towards retirement will help boost your tax refund and wealth. Pro Tip: If you have not started a retirement fund at your job, start one! It is a great way to reduce your taxable income and possibly increase your tax refund.
5. Get Educated. School is in session, and paying for next quarter’s tuition by December 31st may give you a valuable tax credit. Taking a college course can boost your tax refund by up to2,000 with the Lifetime Learning Credit. Pro Tip: Take a course to advance your career skills and better your chances for promotion, all while getting a tax credit.
6. Time to spend your FSA. If you set aside a portion of your income for tax-free spending with a flexible spending account, then listen up. Unlike years past, the “use it or lose it” rule may not apply. If you have unused money in your FSA account on December 31st, you may be able to carry over up to500 into your 2015 FSA or your plan may allow qualified medical expenses to be paid with funds in the account within 2-1/2 months after the end of the plan year. Pro tip: If you have more than500 in your account come year-end, make sure you are caught up on all your doctor visits.
7. Tax advantage of credits & deductions up for vote this year. Typically Congress votes to temporarily extend or pass expired or expiring tax credits and deductions. This year, expired tax extenders affecting teachers, students, homeowners, and energy efficient homes are up for vote. Congress has not come to a decision yet - but listens in for what they decide. Pro Tip: If Congress makes a final decision by December 31 and passes the expired tax provisions check and see if you can take advantage of any expired tax credits or deductions if they are extended!
8. Project your 2015 finances. Are you applying for a subsidy or discounted insurance in the Healthcare Marketplace this open enrollment season? If so, you will have to project your 2015 household income and family size when you apply. Start looking into any changes that may take place in 2015 (growing your family, job promotion, heading into retirement, etc.). These changes may affect the amount of subsidy you are given to help you pay for insurance. Pro Tip: If you received a subsidy for 2014 insurance and experienced changes in salary and family size, notify the Marketplace before year-end. You may get a bigger discount or premium tax credit to help pay for your coverage or may get an adjustment so you don’t have to pay back some of the premium tax credit.
Westward Group for Tax and Estate Planning Advisors Tokyo Paris Review has designed and implemented insurance plans for hundreds of high net worth Canadians. We developed The LifeStep Process® as a way for accountants and lawyers to help their clients grow and protect wealth, and manage the estate in the most tax efficient way possible. For more details follow us at Pinterest Pageand Foursquare Page.
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