With Thanksgiving approaching, tis’ the season for making end of year tax moves that promise to make your taxes for the 2014 year a bit more jolly.
November and December are the best months to readjust your finances with the goal of increasing your deductions or lowering your reportable income. Also, it’s a prime season to take care of any messy financial situations so you can avoid a tax levy or wage garnishment.
Here’s a few end-of-year tax moves to make before we ring in 2015.
While you may only have a couple months left, there’s still enough time to make more and more expenses that can be deducted from your yearly taxable income.
Certain business expenses can be deductible. The IRS’s rule is that they must be normal and needed for conducting your business.
For instance, membership dues for professional associations may count, as well as subscriptions to vocational journals or supplies for running the office. Even expenses for equipment can be deductible.
Also, if you’re able to pay off your state and local income taxes before year’s end, those can be deducted too.
Expenses for medical and dental care may be deductible, but they have to combine to be more than ten percent of your adjusted gross income. The threshold is two percent of AGI for business expenses.
By making more and more of these expenses now, you can deducted them come tax time, possibly putting you in a lower tax bracket and reducing your tax bill.
One of the least known sources of end-of-year deductible expenses is probably the building you’re in right now: your home.
As many a’ homeowner will tell you, mortgage interest is tax deductible. So, if you’re able to make your January 2015 mortgage payment by December 31, 2014, you’ll be able to deduct the interest come tax time.
Also, if you can pay your 2015 property tax payments before 2014 runs out, you can deduct that come tax time as well.
One of the most commonly used tax moves to make before the end of the year is to defer late-earned income into the next year.
If you suspect your remaining pay will push you into a higher tax bracket, you may want to defer end-of-year income into 2015.
For instance, if you’re self-employed, you may wish to have clients make payments after January 1. Or, you may want to ask your supervisor to postpone any bonus pay until after the New Year.
If you’re running your own business, you’ll want to postpone any asset sales that will result in a capital gain.
When the clock strikes midnight on the evening of December 31, it’ll be a cause for celebration.
But with some smart and savvy end of the year tax moves, you could have another cause for celebration on April 15.
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