The end of the year is almost here.
It’s time to reflect on what all you’ve accomplished and start thinking about what you want to happen in 2014.
If you wait until the new year to start dealing with your income tax situation, you are probably missing out on a few opportunities to save.
So let’s take a look at seven money saving year end tax tips.
1. Estimate Taxes Now – It’s important to take some time to estimate your federal income taxes before the year ends. Doing so will allow time for you to make the necessary adjustments to affect the amount of your total tax burden. An excellent tool to help estimate your taxes is TurboTax TaxCaster.
2. Start a Tax Prep Checklist – This is a great time to break out a tax preparation checklist and start checking items off as they come in. Break out last year’s tax return as a reference to help build out a more accurate checklist.
3. Organize Those Tax Records – If you keep physical copies of your tax returns this is a good time to locate last year’s file for reference and create a brand new one for your 2013 taxes. Temporarily place this file next to where you collect your mail, and drop items (W2s, 1099s, etc.) in as they arrive to your home. Additionally, this might be a good time to invest in a scanner and go digital with your records.
4. Invest Into a Retirement Account - One of the best things you can do for your tax situation at this time of year is invest more money into your 401K. December 31st is the deadline to make contributions for this year. If you’re thinking of investing with an IRA, you’ll have a little longer: April 15th or the date you file. Both are great decisions that help prepare you for retirement and reduce your tax burden.
5. Contribute to (and Spend Dollars in) a Flexible Spending Account – If you don’t have a flexible spending account, consider opening one through your employer to take advantage of the tax-deductible medical spending (up to $2,500). If you already have a flexible spending account, be sure to use up the funds in the account by the end of the year or whenever your employers grace period ends.
6. Make Those Charitable Contributions – It’s the giving season. Take advantage of this great tax deduction and contribute cash, clothes, and more to the less fortunate this holiday season. Note that 2013 is the last year people age 70 and a half can make a qualified charitable donation (up to $100,000) from an IRA.
7. Think About Deferring or Accelerating Income and Expense – After estimating your taxes and considering probable changes to your income and expenses in the coming year, you might want to defer or accelerate your income or expenses. As an example, if you know you’ll be earning more next year, you might want to put off paying your annual property taxes until January.
Doing so will give you more expenses in the next year to offset the higher income. If the opposite is true and you expect your income to fall in 2014, you might want to take advantage of every deduction you can – like paying those annual taxes in December, or prepaying your January mortgage payment to get an extra mortgage interest deduction.
By taking action now, you’ll be able to save at tax-time.