Protect Your Income With These Useful Tax Strategies

10 Year-End Tax Strategies

Protect Your Income With These Useful Tax Strategies

There are a number of strategies that may protect your income if you take action before December 31.  In addition, by addressing these year-end tax strategies now, you will be one step closer to a long-term strategy that may benefit you in 2015.

Get Organized

The first step towards putting your tax strategies in place is to organize.  Begin putting together your 2014 information now.  You’ll want to be sure that you have relevant receipts, cancelled checks, income information, contribution acknowledgement letters, investment income forms, settlement statements from the sale or purchase of your home, etc.   There are several great tax preparation checklists available online.

Be Aware Of Healthcare Costs

Due to the Affordable Care Act, most Americans are now required to have health insurance.  If you weren’t covered, you will  owe an “individual responsibility payment” of the greater of 1% of household income above the income tax filing threshold ($10,150 for an individual) or a flat amount of $95 for and adult, and $47.50 per child under age 18, up to a maximum of $285.  The payment will be due with our 2014 tax return.  If you’re uninsured for just part of the year, 1/12 of the year penalty applies to each month you’re uninsured.  If you’re uninsured for less than three months, you don’t have to make a payment. There is a great deal of healthcare information out there- please be sure to read up.   

Giving to Individuals

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

Giving To Charities

Many individuals use the tax-reduction strategy of contributing to charitable causes before the end of the year.  You will need receipts for all contributions made, not just those over $250.  You can also consider donating stocks or mutual funds that you’ve held for more than year and no longer fit your investment goals.  If a charity cannot accept a gift in the form of appreciated stocks or  mutual funds, another consideration is to set up a donor-advised fund. 

Itemized Deductions

Consider adjusting the timing of certain payments such as medical expenses, property taxes, and charitable contributions. You can accelerate certain expenses by making payments before the end of 2014 or delay certain payments into 2015 so that larger amounts fall within one year. Keep in mind that medical expenses for 2014 are deductible to the extent they exceed 10% of your adjusted gross income (7.5% if you are age 65 or older) and that charitable contributions are deductible for 2014 if credit cards are charged or checks are mailed by December 31.

Defer Income or Bonuses

If you’re nearing the top of your tax bracket, you might ask your employer to hold bonuses until January.  This may prevent the need to pay more in taxes.  Another option might be to hold off on selling assets that will produce a large capital gain until 2015.  Just be sure to consult with a tax professional and review your tax situation and future anticipated earnings to determine if a deferment makes sense for you.

Set Up Retirement Accounts

If you are self-employed, you can take advantage of the same ops to save for retirement on a tax-deferred basis. As employees who participate in company plans.   There are a variety of plans including SEPT IRAs, Keoghs, solo 401(k) plans- into which you can put some of your self-employment earnings. 

Contribute The Maximum Amount to Your 401(k)

Contributing the maximum allowable amount to your account will reduce your taxable income for the current tax year and allow your earnings to grown on tax-deferred basis.  Contribution to your 401(k), 403(b), 457, or employer-sponsored plan must be made by December 31, 2014. 

Take Your Required Minimum Distribution

A Required Minimum Distribution (RMD) is the amount of money that must be withdrawn from your retirement account if you are over the age of 70.  As a retiree, it will be critical to ensure you are keeping up with RMDS as they are required by law because you cannot keep retirement funds in your account indefinitely.  Be sure to investigate all of the details regarding RMDs in order to find ways to make a tax-free distribution.

Make The Most of Losses

If you’ve experienced losses this year due to the stock market, mutual funds, or other investments, it’s possible to offset capital gains.  Look through your taxable investment accounts and consult with a professional to determine your options.  Be sure to remember the “wash sale rule” which prohibits taxpayers from recognizing losses on sales of securities that are repurchased within 30 days.

For 16 strategies that could protect your income if you take action before December 31, please download this informative e-book, “Year-End Tax Strategies To Safeguard Your Income.”

Disclosure:  This information is provided to you as a resource for informational purposes only.  It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors.  Past performance is not indicative of future results.  Investing involves risk including the possible loss of principal.  This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. 

Wes Moss is the Chief Investment Strategist at the financial planning firms Capital Investment Advisors and Wela. He is also the host of the Money Matters radio show on WSB Radio, and host of the TV show Atlanta Tech Edge on Atlanta’s NBC affiliate. In 2014, he was named one of America’s top 1,200 financial advisors by Barron’s Magazine. He is the author of several books including his most recent, You Can Retire Sooner Than You Think  - The 5 Money Secrets of the Happiest Retirees, which has been one of Amazon’s best-selling retirement books in 2014.