10 year-end tax moves to make
9. Pay college costs early
The spring semester's bill isn't due until January, but it might be worthwhile to pay it before year's end. By doing so, you can claim the American Opportunity Tax Credit on this year's tax return.
The American Opportunity credit replaced the Hope tax credit in 2009 and is in effect through the 2017 tax year. It's worth up to $2,500 with up to 40 percent of the new credit refundable. That means you could get as much as $1,000 back as a tax refund even if you don't owe any taxes.
Tuition, fees and course materials for four years of undergraduate studies are eligible expenses under the American Opportunity credit. This includes education expenses made during the current tax year, as well as expenses paid toward classes that begin in the first three months of the next year.
10. Adjust your withholding
Did you write the U.S. Treasury a big check in April? Or did you get a large refund from Uncle Sam instead? Neither is a particularly good financial or tax plan.
Most of us cover our eventual tax bills through payroll withholding. Ideally, you want the amount coming out of your paychecks throughout the year to be as close as possible to your final tax bill. If you have too much withheld, you'll get a refund; too little withheld will mean you'll owe taxes when you file.
You can correct the imbalance by adjusting your payroll withholding now. The correct amount taken out of your final 2014 paychecks will help ensure that you don't over- or underpay the tax collector too much next filing season.