The end of the year will be upon us soon and now is the time to take advantage of some tax savings strategies before 2014 comes to a close. If you are looking to lower the amount of tax you owe this year, let me share a few tips about the most common ways individual taxpayers can accomplish this…accelerating deductions and taking full advantage of available tax credits.
Be charitable – Make a donation to your favorite, qualified tax-exempt organization before the end of the year. Checks mailed by December 31st qualify as an itemized deduction on this year’s return. And remember to clean out the closets. Many charities accept donations of clothing or other household goods. The fair market value of these donations qualify as an itemized deduction.
Offset capital gains with capital losses – Capital losses reduce income up to the amount of capital gains plus $3,000. (Any excess loss is carried forward to future years) Review your taxable portfolio to see if there are any losing positions you may want to eliminate. However, remember not to make long term investment decisions based on short term tax savings.
Don’t forget about the kids – Illinois offers the Bright Start and Bright Direction college savings programs. These qualified section 529 savings plans allow for the tax free growth of your child’s college fund. Contributions, up to $10,000 per parent, are deductible on your Illinois income tax return providing a potential $1,000 tax savings.
Accelerate deductible expenses – Make your January mortgage payment by December 31st. This can provide you with 13 months of deductible mortgage interest expense. Your check will need to be received by your lender prior to the year-end to be reported. Remember to use the same strategy in the following year or you will be only report 11 months of expenses for 2015.