Last-minute Tax Moves for 2014
“The heat is on,” taxpayers, said Laura Saunders in The Wall Street Journal. Unfortunately, even though tax day is around the corner, Americans are likely to have a hard time getting help from the IRS on last-minute questions this year. Thanks to staffing and budget cuts, the agency is currently “answering only 43 percent of phone calls.” That means it’s especially important to “make every effort to prevent tax problems before they occur.” One of the biggest points of confusion will be the Affordable Care Act. You’ll have to note on your 1040 whether you had health coverage last year, and “about half of tax-credit recipients will need to make a repayment that averages $794 for 2014.” Another one: If you sold certain employee stock options, it could be reported to the IRS twice—once by your employer and again by your brokerage firm under a new requirement. And if you’re claiming a charitable deduction of $250 or more, “get proof.”
There’s still time to lower your 2014 tax bill with last-minute savings contributions, said Tobie Stanger in ConsumerReports .com. If you opened a health savings account last year, you can make tax-deductible contributions to it until April 15—up to $3,300 per individual or $6,550 for a family, plus another $1,000 if you are 55 or older. Adding to an IRA (individual retirement account) by April 15 can also lower your taxable income. Generally speaking, taxpayers younger than 50 can contribute up to $5,500, while those 50 and older can add up to $6,500. But some caveats apply, and “your deduction will be limited based on income and whether you or your spouse has a retirement plan at work.”
But “grabbing that last-minute tax deduction with a traditional IRA” isn’t always the best move, said Dan Caplinger in DailyFinance.com. If you earn a lot now but expect to be in a lower tax bracket by the time you retire, stick to a traditional IRA. Taxpayers whose incomes have nowhere to go but up might be better off with a Roth IRA, which collects after-tax dollars so your withdrawals are tax-free later, “potentially saving you a bigger tax bill in retirement.”
Then there are the “fly-under-the-radar tax breaks,” said Marisa Torrieri in LearnVest.com. Parents can potentially write off school and camp costs, and self-employed workers can write off parts of their home office—although more record keeping is required these days—along with business travel and health premiums. Homeowners should look into tax breaks for property damage, mortgage points, and “earth-friendly home improvements—like buying energy-efficient windows or installing more insulation.”
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