LaShonda Debrew | CPA Upper Marlboro Maryland CPA LaShonda DeBrew
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9 Killer Tax Saving Tips for the End of the Year: Part 2

by La'Shonda DeBrew on November 28, 2014

In our last installment we gave you 3 tips to implement for the end of the year.  So how did you do?  Have you adjusted your withholding, contributed to a savings plan, or contributed to charity?  Don’t fret however, there is still time to implement those strategies and we’ve added three more.

Here are 3 more tips for you to implement ASAP!

  1. Review your FSA amounts.
  2. Bunch your deductible expenses.
  3. Pay college costs early.

1.  Review your FSA amounts

A popular workplace benefit, the medical flexible spending account, or FSA, requires year-end attention so you don’t waste it. You can contribute up to $2,500 to an FSA via paycheck withdrawals. If that limit seems lower, you’re right. As part of the Affordable Care Act the maximum contribution amount was set at $2,500; before the health care law change there was no statutory limit.

Money goes into an FSA on a pre-tax basis, saving you tax dollars.  But you will lose those funds if you don’t use them by the end of the year. Some companies allow a short grace period into the upcoming year to use the unused FSA funds, but not all. And though the U.S. Treasury recently announced a change in the use-it-or-lose-it rule, allowing account holders to carry over excess money into the next year, if your company doesn’t take steps to adopt it won’t apply.

 

2.  Bunch your deductible expenses

Taxpayers who itemize are familiar with the fact that there are many ways on Schedule A to reduce your adjusted gross income, or AGI, to a lower taxable income level. But it’s important to note that in several instances, your itemized deductions must be more than a certain threshold amount.  So in order to get the most Schedule A deductions be sure to speak with your tax adviser about how to effectively bunch your expenses together for the current tax year so that you meet those thresholds.  You may need to spend a little more in 2014 in order meet a threshold.

 

3.  Pay college costs early

Even though the spring semester’s bill isn’t due until January, it could be worthwhile to pay it before year’s end.   When you do this you are able to claim on this year’s tax return the American Opportunity Tax Credit which replaced the Hope tax credit in 2009.

The American Opportunity credit is in effect through the 2017 tax year and it’s worth up to $2,500 with up to 40 percent of the new credit refundable.  A refundable credit means even if you don’t owe any taxes, you could receive as much as $1,000 back as a tax refund.

Elegible expenses are tuition, fees and course materials for four years of undergraduate studies.  This includes current tax year, as well as expenses paid toward classes that begin in the first three months of the following year.

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