2014 Year End Tax Tips

Year End Tax Tips 2014

  • Do a tax projection before year end. For most taxpayers it’s a matter of adding up income and subtracting personal exemptions and either standard or itemized deductions. Adjust tax withholdings for the end of the year on your paystub, or consider paying in an estimated tax payment if needed.
  • Consider Roth IRA contributions if you are within the income limitations. Roth contributions for 2014 can be made until 4/15/2015.
  • Consider Roth IRA conversions. Because of the tax-free nature of Roth IRA withdrawals, consider your current tax bracket compared to your expected future tax bracket. Lower bracket now vs. higher bracket later is an opportunity for Roth conversions.
  • If you’re within the 10% or 15% tax bracket, pull in capital gains on securities that have been owned for over a year at a 0% long term capital gains tax rate.
  • Consider whether you should pull in losses on your investments. The IRS will allow taxpayers to deduct a maximum of $3000 in long-term capital losses against ordinary income, and unused losses can be carried forward to future years. If you are in a high tax bracket, that can be valuable tax savings.
  • Maximize retirement contributions based on what you can afford up to the new limits. If you’re over age 50, be sure to take advantage of catch-up contributions.
  • Take required minimum distributions (RMDs) from IRAs if over age 70 ½ or if you have an inherited IRA. Failing to take an RMD before the end of the year will result in a 50% penalty of the amount that was not withdrawn in addition to the tax due.
  • Make your property tax and estimated state income tax payments by December 31 if you want the write them off in 2014 for federal tax purposes.  You might want to wait until January to make property tax and state estimated tax payments if you think you will be in a higher tax bracket in 2015.
  • For 2014 you can gift up to $14,000 to any individual that you would like without incurring gift tax.  If you are married, your spouse can gift an additional $14,000 to the same individual.
  • Consider donating appreciated stock rather than writing a check to charity. You get the full value of the stock as your charitable contribution deduction.
  • Watch out for the social security tax bubble – Up to 85% of your benefits could be subject to income taxation depending on other sources of income.
  • Install a renewable-energy source in your home like solar panels or solar water heaters. Your tax credit can be worth up to 30% of your expense. This is available through 2016. There is an analysis that should be run on how quickly the net cost would be recovered. If you don’t plan on being in your home very long it may not be worth installing, even with the tax credit.

Contact us today if you have any questions about these year end tax tips.

 

Copyright: alphaspirit / 123RF Stock Photo

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