It's hard to believe, but 2014 is coming to an end. That means it is down to the wire on getting your financial matters in order before New Year's Day.
Take some time during this busy season to make sure you have made the best choices with your money. Wells Fargo Financial Advisors have a couple of suggestions that can help save on your taxes.
1. Give to charity to increase deductions. Making gifts to charity before year's end may reduce your tax bill if you can itemize your deductions. Cash contributions to charities must arrive by Dec. 31. If you're making a contribution by check, the date you mail or deliver it will be considered the date of the gift. To make a charitable contribution to a gift fund, the account must be open and the deposit completed before Dec. 31 to quality as a 2014 gift.
If you are planning to make a nondeductible gift to a friend or family, keep in mind you can only give $14,000 to an individual without generating gift tax implications. All gifts must be completed by Dec. 31 to qualify as 2014 annual exclusion gifts.
2. Time contributions and withdrawals to get more from education savings. Education Savings Accounts (ESAs) and 529 plan accounts are similar — they're both tax-advantaged vehicles to save for higher education expenses. Rules for making 2014 contributions do differ. The 529 plan contributions must be deposited into the account no later than Dec. 31. If you're opening a new account, it must be open and the deposit received by the sponsor company no later than Dec. 31. Contributions for 2014 can be made until April 15, 2015.
3. Contribute to your employer-sponsored plan to reduce taxable income. If you're not putting the maximum amount allowed into your employer's 401(k) or 403(b) consider increasing your contributions. The maximum you can defer into these plans in 2014 is $17,500 ($23,000 if you're age 50 or older). The deadline to make these contributions for this year is Dec. 31.
4. Know your flexible spending account. The standard advice for people with an FSA at work used to be: spend the money by the end of the year or lose the balance. A change in the law, however, now allows employers to offer either a 2½ -month grace period to use up the money for the previous year or a $500 carryover per year to use in the following year. The new flexibility isn't automatic, so make sure you know the rules for your employer's plan, or you will run the risk of losing some of the money you deferred into an FSA.
5. Add to or open an IRA. If you have an IRA account or open a traditional IRA, you might be able to deduct at least some of your contributions on your tax return. If you don't make a lot of money, your contribution also could be used to claim the retirement savings contributions credit. Even if you don't get a deduction, you'll be adding to your nest egg.
6. Adjust your withholding. If you received a large tax refund last year make an adjustment to your payroll withholding now. The correct amount taken out of your final 2014 paychecks will help to ensure that you don't over- or underpay the tax collector too much next filing season.
7. Make the most of home ownership. Pay January's mortgage bill by Dec. 31 and deduct the mortgage interest on your coming tax return. Check out federal tax credits for Consumer Energy Efficiency products.
8. Request a free credit report from Annualcreditreport.com to start the beginning of 2015 with all the information you need to get you on your way to financial freedom.