Regardless of the outcome of the IRS open date, you still have time to maximize refunds, and get a head start on your return to be first in line to get your refund.
Here are six things you can do now to increase your tax savings:
#1 — Make the most of your employer’s tax-free benefits
If you have a flexible spending account (FSA) balance, find out if your employer has implemented the new rule allowing a carryover of up to $500 in excess funds to March 15, 2015.
If not, use the remaining balance by Dec. 31 so you don’t lose that tax-free money.
Maximize the tax benefits for retirement savings by contributing up to $17,500 to a 401(k) and $5,500 to your traditional and Roth IRAs ($6,500 for 50 and older).
Unlike most tax benefits, IRA contributions made through the April 15 deadline count toward 2014 totals.
ven if you can’t reach the contribution limits, contribute enough to maximize your employer’s match.
Additional retirement tax benefits are also available for employees with lower incomes, self-employed and sole proprietors.
#2 — Be charitable
Donating cash, clothing or a car by Dec. 31 can reduce your taxable income if you itemize deductions.
Get a head start on your tax return by entering cash, non-cash and recurring donations into TaxACT’s Donation Assistant, available as a free mobile app and in TaxACT Deluxe.
- Audit-backed, fair market values for clothing, furniture, electronics, appliances and other household items for 2014
- Automatic data synching to TaxACT’s secure servers
- App data import into TaxACT Deluxe returns (available in early January)
- Integration with TaxACT Accounts to securely manage donations, tax returns and more from any device with the same username and password
#3 — Evaluate your health insurance situation
If you want Affordable Care Act marketplace insurance effective Feb. 1, 2015, enroll or renew by Jan. 15.
Before applying, get TaxACT’s HealthWatch report with all the tax information needed for marketplace applications.
HealthWatch, in TaxACT Free Federal and Deluxe, includes details for a more accurate estimate of 2015 income to help advanced premium tax credit recipients avoid a large tax bill in 2016.
Have you been uninsured for more than three months in 2014?
Visit healthcare.gov to see if you qualify for an exemption.
Hardship exemptions requiring approval via a paper application can take several weeks for your marketplace to process, so apply now to avoid a delayed tax refund.
If you don’t qualify for an exemption, calculate your 2014 individual shared responsibility payment in TaxACT or with TaxACT’s Tax Penalty Calculator at HealthcareACT.com.
#4 — Pay your property taxes or mortgage payments early
Homeownership offers many tax breaks, but to maximize them, you need to make some moves by Dec. 31 to lower your tax bill.
If you haven’t reached the maximum amount for your home mortgage interest or real estate tax deduction, pre-pay your January mortgage payment or your 2015 state or local property taxes before Dec. 31.
Unlike rent, which covers your stay for the upcoming month, mortgage payments are made at the end of your stay.
This means that your January mortgage payment is actually interest accrued from December; thus making it eligible for a tax break on your 2014 taxes.
By accelerating your mortgage payment by just one day, you may gain an additional tax deduction that would have otherwise been missed. Tweet this
Bonus tip— this same strategy applies to student loan payments.
If you haven’t reached the deduction limits, pre-pay spring tuition or your January student loan payment before Dec. 31 to lower your tax bill.
#5 — Assess your gains and losses
Capital gains can be offset by capital losses to reduce your taxable income.
You can also deduct up to $3,000 ($1,500 if married filing separately) of excess losses for 2014.
Losses in excess of that amount can be carried forward to 2015.
Keep in mind:
- Capital gains are generally taxed at lower rates than other income, but short-term gains are taxed at a higher rate than long-term gains.
- Short-term gains are taxed at your highest tax bracket, so consider selling short-term losses to offset short-term gains. If all gains are short-term, look at selling long-term losses.
- Wash sale rules prohibit a loss if you buy the same stocks or securities within 30 days of selling.
#6 — Forecast your 2014 taxes now
TaxACT is up-to-date with tax law changes for 2014.
Import last year’s return and answer easy questions to preview your federal and state taxes. The program will notify you if your deductions or credits are included in tax extender legislation.
Returns can be completed and e-filed in TaxACT starting in early January. TaxACT will transmit early returns to the IRS as soon as the agency opens its doors.
Get a head start and estimate your 2014 taxes using TaxACT’s free tax calculator.
Do you typically make any year-end moves to maximize your refund?