5 last-minute tax strategies before the end of the year
The final weeks of December are all that remain to reduce your tax liability and get organized for the 2015 tax year. TaxSlayer Vice President Zane Christopher offers five strategies to consider before the New Year.
The taxpayer’s number one priority should be saving money. Take advantage of your 401(k) as soon as possible by contributing as much as you can afford. If you can only afford a small percentage, then increase that percentage by 1 percent each tax year. Also, sell stocks that are losing and look at the possibility of making an IRA contribution.
If you can already itemize medical deductions and you receive more medical bills in the mail before Dec. 31, go ahead and pay the amounts before the year ends. The bill has to be paid regardless, and this will minimize your tax liability.
Don’t be surprised by changes to your filing status and tax liability if you had changes in your family such as new children or a recent marriage. If you recently had a baby, you will get a tax exemption and possibly qualify for the child tax credit, earned income credit and child care credit. These can greatly increase your refund amount or reduce the amount of taxes you owed. But you should also be aware that divorce changes your filing status and can cause you to owe more taxes or drastically reduce your refund.
Be prepared to claim deductions if you purchased a house. You can deduct mortgage interest, mortgage insurance premiums (based on income), loan origination fees and loan discount points. Real estate taxes are also deductible. Moving expenses are deductible if the move is job related and meets a specified distance.
Charitable donations are an easy and popular way to reduce your tax liability. It’s very common for people to make tax-deductible donations during December and around the holidays. Consider making a contribution to your church, favorite charitable organization or another great cause.
Use this month to get organized for tax season and find ways to increase your tax refund! You’ll be glad that you did.