6 Smart Tax Moves to Take Before the End of the Year These tips will help you save on your tax bill and put some money into your retirement fund.

By John Hewitt

Opinions expressed by Entrepreneur contributors are their own.

It's a busy time of year. It's wise, though, to set aside some quality time to consider tax moves that can help your business.

Here are six things you should do as soon as possible:

1. Stock up on supplies

Self-employed taxpayers who use the cash method of accounting can pay bills on or before Dec. 31, 2014, and claim the expense on their return. That makes now a good time to stock up on necessary supplies and equipment.

Related: 5 Year-End Tax Preparation Tips That Will Make Your Accountant Happy

Remember to take advantage of the section 179 deduction for computers and other big-ticket items put into service before the end of the year. The section 179 deduction for 2014 is back at up to $500,000 now that the house and senate voted to extend tax credits that had expired in 2013 and President Barack Obama signed the bill into law. Without an extension, the deduction would have dropped to $25,000.

The $500,000 deduction extension is good only for 2014, so it's important to make those purchases and put the items into service before the end of the year.

2. Weigh income and expenses

Sit down with your tax preparer or financial adviser and consider your tax situation now and into the future. Would it be wise to shift some income into the new year and pay taxes on it in 2015? If it looks as though your earnings will be lower in 2015, shifting income could be a good decision. You could also make January payments early. Pay a few bills in December and identify them as the January payments. A payment posted to your account in 2014 affects your taxes in 2014.

3. Set up a retirement plan

Retirement plans are a wise investment. Weigh which plan is best for you, then set aside your contributions.

401K: The maximum contribution is $17,500. A catch-up contribution of $5,500 is available for those 50 and older.

Related: Hurry, Here's 5 Things You Can Still Do to Lower Your 2014 Tax Bill

IRA: The deductible amount for a contribution to a traditional IRA is up to $5,500 per person, and up to $6,500 per person age 50 or older. Workers over 50 can make additional contributions to their SIMPLE IRAs up to $2,500. In 2014, a married couple filing jointly with a modified adjusted gross income (MAGI) of more than $96,000 but less than $116,000 can take a partial deduction for a traditional IRA. The same goes for single taxpayers (including head-of-household filers) who make more than $60,000 but less than $70,000.

Employee pension plan: If you're self employed, you can set up an employee pension plan and contribute the lesser amount of up to 20 percent of your income or $52,000 before April 15, 2015.

4. Convert to a Roth

If you think your tax rate is going to rise sometime in the future, converting to a Roth makes sense. Withdrawals from traditional individual retirement arragements (IRAs) are taxed at your ordinary income tax rate, but all withdrawals from Roths are tax free and penalty free as long as you are at least 59.5 and the converted account has been open at least five years. You do have to pay taxes on any pre-tax contributions and earnings in your traditional IRA for the year you convert.

5. Sell loser stocks

With the stock market experiencing record highs and lows this year, perhaps you have experienced a stock market slide that has affected your portfolio. There's still time to sell stocks or mutual funds and take the losses to offset your income.

6. Be generous.

You can give up to $14,000 to as many individuals as you like before Dec. 31 without filing a gift-tax return. If you're married, you and your spouse can give up to $28,000 per recipient.

Related: 4 Things Every Small-Business Owner Can Do to Finish 2014 Strong

Wavy Line
John Hewitt

Founder and CEO of Liberty Tax Service

John Hewitt is founder and CEO of Virginia Beach, Va.-based Liberty Tax Service, a tax preparation franchise firm. He also founded Jackson Hewitt and is a former H&R Block regional director. 

 

Editor's Pick

She's Been Coding Since Age 7 and Presented Her Life-Saving App to Tim Cook Last Year. Now 17, She's on Track to Solve Even Bigger Problems.
Lock
I Helped Grow 4 Unicorns Over 10 Years That Generated $18 Billion in Online Revenues. Here's What I've Learned.
Lock
Want to Break Bad Habits and Supercharge Your Business? Use This Technique.
Lock
Don't Have Any Clients But Need Customer Testimonials? Follow These 3 Tricks To Boost Your Rep.
Why Are Some Wines More Expensive Than Others? A Top Winemaker Gives a Full-Bodied Explanation.

Related Topics

Business News

'All Hell Is Going to Break Loose': Barbara Corcoran Issues Warning About Real Estate Market, Interest Rates

The "Shark Tank" star appeared on FOX Business' "The Claman Countdown" this week.

Business News

This Is the Most Loved Company of 2023, According to a New Report

A new Axios and Harris Poll ranked the 100 most visible U.S. companies.

Business News

Woman Ties the Knot at White Castle Almost 30 Years After the Chain Gave Her Free Food as a Homeless Teen

Jamie West was just 12 years old when she ran away from the foster care system.

Branding

How I Made Money From My Book Without Selling a Single Copy

Did you know you can make money with a book without selling copies? Here's exactly how I did it.

Business News

Lululemon Stock Surges After Strong Q1 Earnings Report, With Massive Earnings Overseas

The athleisure brand reported net revenue growth of 24% in the first quarter of 2023.

Money & Finance

3 Ways to Create Multiple (Big) Streams of Income

Here are three ways to create multiple streams of income. These strategies require effort and resources but offer significant financial potential.