With only a few days left in 2014, it may seem like there is
nothing that can be done with such short notice to reduce your tax
liability. This is simply not true. While you can’t change how much income you
made over the course of the year or increase your tax withholdings that were
set too low over the course of the year, there are some small things that you
can do to reduce your tax liability and/or increase your tax refund before the
end of the year.
All of these things may not be a good idea for
everyone. Whether these things are best
for your situation depends on your past tax years, your current tax situation
and income, and your expected tax situation next year. If you are unsure if something is a good
idea, it might make since for you to contact an experienced tax professional
before making any moves.
- Pay Your Student Loan Interest:
This is one
of my favorite moves since it is pretty easy and you don’t hear about it very
often. Student loan interest is deductible
up to $2,500 per year, even if you don’t itemize your deductions (subject to
income requirements). I generally pay
the accrued interest on my student loans on December 30 to reduce my income for
that calendar year.
- Pay Your January Mortgage Payment:
If you do
itemize your deductions, one of the biggest deductions is your mortgage
interest. Pay your January mortgage
(that you have to pay anyway) in December to increase the amount of interest
you pay in this calendar year.
NOTE
REGARDING MORTGAGES: During the 2012 &
2013 tax seasons, a problem started showing up.
People who had always itemized their deductions suddenly realized that
it no longer made financial sense to do so.
This was due to mortgage modifications that drastically reduced their
interest rates. To those that got
mortgage modifications early in the year or late last year, you might find that
it doesn’t make sense to itemize anymore due to the drastic decrease in
mortgage interest paid. It’s not all
bad, if you are one of these people, you are probably saving a lot of money on
a monthly basis, even if it means Uncle Sam gets a little more at the end of
the year!
- Donate to Charity:
Have you
noticed that charities are pushing for money this time of year? Not only are people in a more giving mood
around the holidays, they are also looking to decrease their tax liability. Since you can donate to most charities and
churches through their website, you can really do this up until the clock
strikes midnight on New Years.
If you don’t
have money to give, you can go through your closet to see if there is something
that can be given to Goodwill or Salvation Army to be sold in one of their
thrift stores. They will give you a 2014
receipt as long as you can get it to them before they close on December 31. This might give you a chance to reduce those
overflowing closets after Santa gave the kids all of those new toys.
- Invest in an IRA:
IRAs are a
great investment tool to plan for your retirement in the future and reduce your
current tax liability. Most people can
deduct a contribution up to $5,500 per year to an IRA and you don’t have to
itemize your taxes to do it. For certain
low-income taxpayers, you may also be eligible for a credit of a portion of the
contribution. So you get to take it
twice! An added benefit of this contribution
is that you have until April 15 to contribute and you can even use your tax
refund to contribute. Please contact an
experienced tax professional to get more information on how to maximize your
contribution.
- Time your invoices:
If you are
self-employed, time your invoice to reduce your tax liability. For those who have had an unusually good
year, you might want to send out your last invoice to your clients after
January 1. If you have had a bad year financially
and you expect to do better next year, get your invoices out now so you make
more income this year.
Simplified Document Solutions provides professional individual
tax preparation by an experienced and IRS Certified tax preparer for a fraction
of the cost of the competition. You can
reach Simplified Document Solutions by telephone at (678) 490-5841 or you can
schedule an appointment online by going to www.simplifieddocumentsolutions.net
or www.249bankruptcy.com.
Simplified Document Solutions
100 Hartsfield Center Pkwy.
Suite 500
Atlanta, GA 30354
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