During the holidays, your 2014 taxes are probably the furthest issue from your mind. But if you don’t put some thought into them before the year ends, you might end up paying more than you should when tax season arrives. That’s why you should consider these five money-saving moves to make before 2013 comes to a close.
1. Make Purchases That You Can Itemize at Tax Time
If you plan to itemize eligible purchases on your 2014 taxes, you can benefit your finances by buying anything you need before the year ends. If you wait until the first of next year, you won’t be able to itemize what you bought until 2015. Since the IRS does not pay interest on tax refunds, it’s best to maximize the amount you will get back once you file in 2014, and itemizing certain purchases is just one easy way to do so.
2. Donate to Charity Before the Holidays Are Over
If you’re already feeling the charitable spirit of the holidays, it makes sense to just give in and donate. This way, you are being not only generous, but also financially smart, because your contributions this year will turn into tax deductions come April. If you do not have much cash right now but still want to take advantage of this simple money saver, feel free to donate any items you have around the house. Then keep the receipt you are given so you can get deductions on your 2014 taxes.
3. Get Your Medical Needs Taken Care of Before 2014
If you’re generally healthy, you probably rarely get to deduct medical expenses, and that’s because they have to exceed 10 percent of your adjusted gross income to be deductible. But if you are usually just shy of that amount, you can bump it over the edge by taking care of as many medical bills as possible before the year ends. If you need prescriptions, glasses and contact lenses, dental work, or other medical essentials, pay for them this year. In addition, if you have any medical bills you were going to pay after the first of the year, try to pay for them now so you have a chance of reaching that 10 percent threshold for medical deductions.
4. Defer Income When Possible
If you are paid after 2014 begins, you will not have to pay taxes on that income until 2015. So if you have the option and do not need the money until the first of the year, you can save money on your 2014 taxes by deferring your payment until after this year ends. This often works best if you are self-employed and can dictate when you will receive payment, but you can also opt to defer your Christmas bonus until New Year’s Day if given the choice.
5. Increase Your Contributions to Retirement Accounts
If you have a 401(k) and have not contributed the maximum amount yet, you can save on 2014 taxes by putting more money into that account. The max allowed this year is $17,500, though you can put in $23,000 if you are at least 50 years old. The more you add to this account before the end of the year, the more of your money will be tax deferred when it comes to your 2014 taxes. If you cannot afford to contribute the maximum for the year, you should at least try to add as much as your employer will match.