Now that most of my 1099’s have arrived, I’ll be sitting down to do my taxes soon! Today, PF Pro contributor, Melissa Hoffman takes a look at a few ways you can reduce your tax burden and keep more money in your pocket.
As much as you may not want to hear it, we’re well into 2015 and tax season is rapidly approaching. Maybe you thought if you didn’t take advantage of tax breaks by December 31, 2014, you missed out. Lucky for you, there are still some ways to reduce your tax burden now! Here are three ways you can still reduce your 2014 tax burden, through contributions you can still make and deductions you can take.
Boost Your Retirement Savings
You can still contribute to your individual retirement account (IRA). If you don’t have an account, you have until April 15 to open one and contribute the maximum, or you can continue to max out one you already have.
You can contribute up to $5,500 (or $6,500 if you’re 50 or older by the end of 2014), all of which enables you to reduce your taxable income. The exact amount you are able to deduct depends on your income and whether you participate in a retirement savings plan at work, so you may want to talk to a tax professional if you have more questions about your individual case.
Contribute to a Health Savings Account
While you do have to be enrolled in a high deductible health plan (HDHP) with a health savings account (HSA), if you have one, now is a good time to contribute the maximum to your account. As Harry has discussed several times, contributing to an HSA is a win-win-win for tax purposes. With an HSA, you can make a tax-deductible contribution that grows tax-deferred and can be withdrawn for any medical expense (at any age) tax-free. With the ever increasing costs of medical care, you may as well start saving up as soon as you can!
Best of all, you can still contribute to your HSA until April 15, 2015 and claim that contribution as a deduction on your 2014 taxes. The maximum HSA contribution allowed for 2014 is $3,300 for individuals and $6,550 for families. If you’re 55 or older, you can contribute an additional $1,000.
Reevaluate Last Year’s Tax Breaks
Be sure to review tax breaks you may already qualify for from last year, including breaks for going green, being an educator, and student loan interest.
Currently, a tax credit is available for homeowners who installed alternative energy equipment, including solar electric systems, solar water heaters, and even new windows. You can get a tax credit of up to $500 for making these energy-efficient home improvements. For more information on what counts, check out the Alliance to Save Energy here.
Do you have student loans? If so, you can deduct up to $2,500 in student-loan interest for you, your spouse, or a dependent if your modified adjusted gross income (MAGI) is less than $60,000 (single) or $125,000 (married and filing jointly). If you earn more than $75,000 if single or $155,000 married filing jointly, the deduction phases out, so take advantage of the deduction while (if) you don’t make as much!
There are a variety of other tax breaks you can take advantage of, including gambling losses, state and income taxes you’ve already paid, and deductions for specific workers (including teachers). Check out the Credits and Deductions section of the IRS website in see if you qualify for more itemized deductions here.
Although December 31, 2014 has passed, and taken several good tax deductions with it, 2015 still has its own benefits. If you weren’t able to contribute the maximum to your IRA or HSA, you still have plenty of time. You may still be able to take advantage of tax credits too, or at least use them for next year’s return. Either way, there are a variety of ways to continually reduce your tax burden, which will save you money and help augment your retirement savings.
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How are you minimizing your tax burden this year, or what did you do last year to minimize your taxes? Do you typically itemize or take the standard deduction?