3 things you can still do to lower your 2014 tax
In December, I wrote about a few tax moves to make before year-end. But just because the year is over, that doesn't mean you can't make other moves to lower the taxes you'll owe for 2014. So, here are three things you can still do now -- before filing your 2014 return -- that can lower your taxes even more.
Contribute to a self-employed retirement plan
If you're self-employed and have already set up your own retirement plan, you can take a deduction for contributions to these plans, as long as you make the contribution before you file. This deduction is super-valuable because it's claimed as an adjustment to income on line 28 on the front of form 1040.
I've written many times that my favorite type of retirement plan is the Self-Employed 401(k) profit-sharing plan, which allows the self-employed to make contributions both as an employer and as an employee, allowing contributions that can shelter over a third, or more, of your taxable self-employment income.
The catch is that you had to have established the SE 401(k) plan and account before year-end.
Contribute to an IRA
If you're not covered by a retirement plan of your own, or by an employer plan, you can still save for retirement by opening and making a contribution to an IRA. You have until April 15 to open an IRA and make a contribution to it that you can claim as a deduction on your 2014 tax return.
Check the rules for deductible IRA contributions, and if you qualify, you can claim your IRA contribution as an adjustment to income, which lowers your taxes and can increase other tax credits you may qualify for.
If you use a tax preparation program like TurboTax online, it's super-easy to model your tax return both with and without the deductible IRA contribution, which lets you see how much you can save from this strategy. The contribution limit for IRAs for 2014 is $5,500 for those under age 50. People 50 and older can also make a catch-up contribution of $1,000, for a total IRA contribution of $6,500. These limits apply to traditional IRAs and Roth IRAs.
Contribute to a Health Savings Account
If you enrolled in a high-deductible health insurance plan, you should be contributing to a health savings account, or HSA. This special account allows you to make tax-deductible contributions, which can grow tax-deferred. And withdrawals from an HSA can be completely tax-free when used for qualified medical expenses.
You have until April 15, 2015, to make a contribution to an HSA that you can claim as a deduction on your 2014 tax return. This deduction is also a valuable move because it's claimed as an adjustment to income on line 25 on the front of form 1040. You'll also need to include a completed Form 8889.
The maximum HSA contribution allowed for 2014 is $3,300 for individual coverage and $6,550 for family coverage. If you're 55 or older, you can add an additional $1,000.