Now Is the Time for Year-end Tax Planning
Most people put off thinking about income taxes until spring, but the smart way to minimize your annual tax bill is to start planning in the fall.
New homeowners may be accustomed to claiming the standard deduction (for 2014: $6,200 single; $12,400 married, filing jointly). Depending on your mortgage, you may exceed that amount in mortgage interest alone.
Deducting mortgage interest payments from your income is a true advantage of homeownership. One way to maximize this deduction is by making your January mortgage payment early enough in December so it is credited to your account yet this year. Of course, it takes advance planning to have cash on hand for an extra house payment.
Did you buy or build your primary home this year? If so, you may deduct mortgage discount points – prepaid interest – in full. Also, you may be able to deduct points paid on mortgage loans for home improvements.
As the tax year comes to a close, be mindful of other ways to increase your deductions and reduce your income:
- Paid state and local property taxes are deductible.
- Cash and non-cash donations to qualifying charities are deductible.
- Mileage for volunteering is deductible at 14 cents per mile, but you may not deduct your time.
- If you moved at least 50 miles for a job or incurred other job-related costs at your own expense, you may be able to deduct certain costs if they exceed 2% of your adjusted gross income.
- Contributions to qualifying retirement accounts, flexible spending accounts and health savings accounts (HSA) reduce your taxable income.
Finally, did your address change this year? To ensure that vital tax documents find you, be sure to inform investment companies, previous mortgage lenders and previous employers now.
Thrivent Federal Credit Union and its employees cannot provide tax advice. Consult a tax advisor to determine if you qualify for any of the deductions mentioned here.