Last-Minute Tax Moves

There’s still time

As 2014 winds down, there is still time to reduce your potential tax obligation. Here are some ideas to make your 2014 tax return less of a burden on your wallet.

Expenses icon Defer income or accelerate expenses. Remember individual taxpayers are on the “cash basis” of accounting for income tax purposes. That means your income is taxable when you receive it and expenses count when you pay them. With this knowledge consider making deductible payments prior to the end of the year. Examples could be property tax payments, mortgage interest payments, and charitable donations. Shift the expense or revenue into the tax year that will be most beneficial for your tax situation. This review is especially important if you are nearing retirement.
Give to Charities icon Give to charities. Consider making end of year donations to charities of your choice. Remember donations of property in good or better condition and your charitable mileage are also deductible. Receiving proper documentation that acknowledges your contributions is important to ensure you obtain the full deduction.
Donate Stock Consider donating appreciated stock. By donating appreciated stock owned one year or longer to a favorite charity, you receive two benefits. First, you will not have to claim the capital gain on the appreciation of your investment. Second, you can claim the higher market value of the stock as your contribution amount. The procedure you need to follow to qualify your donation of appreciated stock is fairly strict. Ask for help from your broker and the charitable organization to ensure it is done correctly.
Gifts icon Consider gifts. Each year you may gift up to $14,000 without tax consequences to as many individuals as you choose. Consider any gift giving you wish to make up to the annual limit. This could include gifts of cash or property, including investments.
Capital Loss icon Make effective use of capital losses. Remember up to $3,000 in net capital losses can be claimed each year. This loss limitation is calculated after netting all your capital losses against any capital gains. By careful planning you can take advantage of this loss amount each year.
Fund Account icon Fund tax-deferred retirement accounts. An easy way to reduce your taxable income is to fully fund retirement accounts that have tax-deferred status. The most common accounts are 401(k)s, 403(b)s, and various IRAs (Traditional, SEP, and SIMPLE).
Distributions icon Retirement account distributions. If you are over the age of 59 you will want to review whether taking distributions from your retirement plans makes sense. This is especially important if you are over the age of 70½ when required minimum distributions (RMD) must be made. Remember, removing a planned amount from your retirement accounts each year may be more tax efficient than waiting until you are “required” to do so using the RMD rules when you are older.

This is a short list of some of the ideas you can use to lower your tax obligation in 2014. If interested, call to review your situation.