As the end of the year approaches, many taxpayers are mindful of the potential tax bill that awaits them in 2015. The following steps will soften your tax burden.
Donations made by December 31, 2014 are deductible on your 2014 tax return you will file in 2015. To be considered “made by December 31,” a cash gift must be received by the end of the year. A check must be mailed before the end of the year, even if it is not deposited by the receiving organization until January.
If you choose to make a gift by credit card, the charge must occur by December 31. Such a donation will count as a potential 2014 tax deduction even though you probably won’t actually pay the credit card bill until early 2015. As to physical items you donate, each must be received by the qualifying charity prior to year end to qualify as a potential tax deduction.
The deadline for funding 401 (k), 403 (b) or 457 plans is December 31. This year, the limit is $17,500 per employee. If you are over the age of 50, you can make an extra $5,500 as a “catch-up contribution”.
Tax-filing extensions do not apply to your IRA contributions. This means that your contributions must be deposited by your tax filing due date, which is usually April 15. Similar to your tax return, a postmark date is considered timely; therefore, if you send your contribution in the mail by April 15, you will have met the deadline, even if your financial institution receives the contribution after April 15.