Keep in mind these opportunities to reduce your tax burden
Please look out for our year-end client letter with detailed information about 2014 tax changes, ideas for reducing taxable income and increasing deductions and red flags that increase audit risk. In the meantime, keep in mind these key points as it relates to year-end tax planning:
Reducing taxable income:
- Maximize the contribution to your 401(k) plan: $17,500, plus a $5,500 catch-up contribution if you are 50 or older (unchanged from 2013)
- If you are not covered by a retirement plan, open an IRA by April 15, 2015 and get a deduction on your 2014 tax return (up to $5,500 plus a $1,000 catch-up amount if you are 50 or older)
- Roll over any pension distributions into another retirement plan or IRA within 60 days in order to exclude the distribution from taxable income.
- Review your stock accounts and realize losses in order to offset gains.
- Make your January mortgage payment in December
- Pay your State fourth quarter estimated tax payment in December
- Pay your property tax early
- Schedule health-related treatments and exams in the fourth quarter
- If you have a business, purchase and place in service any needed equipment before the end of the year (up to $25,000 of Section 179 deduction is available in 2014)
Important 2014 tax changes:
- The Affordable Care Act (ACA) requires that taxpayers carry healthcare coverage, qualify for an exemption, or pay a penalty
- The lifetime gifting limit for 2014 is $5.34 million, up from $5.25 million in 2013
- The itemized deduction phase out starts at $152,500 for those filing with Single status and $305,500 for those filing with Married Filing Jointly status
- The personal exemption for 2014 is $3,950, up from $3,900.