Many taxpayers believe that there are no money-saving options related to taxes once the New Year starts. However, there are some options available even after January 1 that may still provide you with tax advantages.
- Contribute to a Retirement Account
The Internal Revenue Service allows taxpayers to contribute to a traditional Individual Retirement Account (IRA) by April 15, 2014. For those that have a Keogh or SEP, the filing deadline is October 15, 2014, and you can wait until then to add to the account. The deduction can be taken on your returns for the previous year, and interest is tax-deferred, which makes it a good option for saving for retirement while reducing your tax burden. The deduction is only available if you are not eligible for a company retirement plan. If you are eligible for a retirement plan, and have an income of $59,000 if single or $95,000 if married, you may take the full deduction.
- Make an Estimated Tax Payment
If something happened over the year and you are expecting to owe a large tax bill when you file, you may want to consider making an estimated tax payment and avoid penalties or interest that may accrue due to an underpayment penalty. However, the deadline to file estimated taxes is January 15. If the income was from an unexpected windfall, such as contest winnings, you can file a form with the IRS to reduce any extra payments.
- Itemize Deductions
Many Americans choose to take the standard deduction rather than itemize because they believe that itemizing is too difficult. Although many people are aware of some deductions that may be itemized, such as mortgage interest or charity deductions, many are unaware of other expenses that can be deducted, such as tax-preparation fees, mileage for charity work and fees incurred while searching for a job. Medical expenses that exceed 10 percent of the adjusted gross income are also deductible.
There is still the possibility to reduce your tax burden even though the New Year has begun. Find more information on taxes, money and the market in investment newsletters available online.