It’s not too late to cut your 2014 tax bill. Prior to Dec. 31st:
- Increase your 401(k) and 403(b) contributions if you haven’t been contributing at the maximum rate all year. This year you can put away up to $17,500 ($23,000 if 50 or older) into your 401(k) or 403(b) plan. If you’re self-employed, consider setting up a Solo 401(k) by 12/31.
- Take a look at your withholdings and instruct your employer to withhold additional taxes if you haven’t had enough taxes withheld during the year and might get hit with an underpayment penalty.
- Consider selling your non-retirement investments that have decreased in value since your capital losses can offset other capital gains realized during the year (including from your mutual funds), and then can be used to offset up to $3,000 of wages and other income.
- Send in your January 2015 mortgage payment early enough so it will be processed prior to 12/31/14. By sending in your payment a few weeks early, you can deduct the interest portion of that payment a full year earlier.
- Clean out your closets and donate your clothing and household items to a charitable organization since “non-cash” contributions are deductible if you itemize. Don’t forget to get a receipt. And make sure to make a list of the donated items, including each item’s condition since only donations of clothing and household items in “good condition or better” qualify for a deduction.
- For gifts of money, making your donation by credit card before December 31st allows you to deduct the donation on this year’s return, even if you don’t pay your credit card bill until 2015. And you always have the option of donating appreciated investments to charities. You get to claim your donation based on the value of the assets donated, without paying any capital gains taxes on the appreciation.
- Pre-pay your projected state tax shortfall if you’ll be itemizing your deductions and won’t be subject to the Alternative Minimum Tax.
- Pre-pay or pay off your medical bills if your total medical expenses exceed 10% of your income and you itemize.