The tax year 2014 is coming to close very fast. There are still some things you can do to reduce your taxes between now and the end of the year. Here is a quick list of items to consider for helping to reduce your taxes. If you want to know how any of these items can affect your taxes, we are happy to do a tax projection for you so that you can plan your cash flow requirements or what your expected refund may be!
1. Make an HSA contribution. You may be able to deduct up to $3,300 for individual coverage and $6,550 for family coverage (those age 55 or older also get an additional $1,000 catch-up amount).
2. Harvest your Capital Losses: If you have investments in your non-qualified accounts that are in loss positions, it may be a good time to sell the investment to recognize the loss. These losses may be used to offset capital gains from other investments. If you wish to remain in a certain investment, you may decide to sell the stock to recognize the loss in 2014, then re-purchase the stock 31 days later to avoid the "wash sale rules". Please contact your financial adviser to discuss any investment decisions.
3. Accelerate deductible contributions: You may want to use your credit card to make a charitable contribution in 2014. If you use your credit card to make the contribution before December 31, 2014, you will get a deduction in 2014 even though you do not pay your credit card bill until 2015!
4. Non-Cash contributions: Clean out your closets to donate new or kindly used clothing or household goods. You need to make sure the goods are in good condition and you need to keep accurate records of what items were donated along with values of each item.
5. Increase your withholding: In order to avoid underpayment penalties, you can increase your withholding prior to year end. In addition to avoiding underpayment penalties, you can also reduce your balance due on April 15, 2015 as well as possibly increasing your state tax deduction on your 2014 Federal return for Minnesota withholding taxes.
6. Required Minimum Distributions: If you are over age 70 1/2 and are required to take a RMD, make sure you do so prior to December 31, 2014 to avoid excise taxes. Penalties for not taking your RMD, when required, can be up to 50% of the required RMD. Please remember that if you turned 70 1/2 in 2014, you can defer your first RMD until 2015. However, in 2015, you will be required to take both your 2014 and 2015 RMD in one year!
7 Gifts: You can make gifts to any individual up to $14,000 for 2014 without incurring any gift taxes. Gifting to individuals is not tax-deducible and should be considered for estate and gift tax purposes only. Please refer to your estate planning attorney or contact our office if you have questions regarding gifting.
Please contact our office if you want to discuss any of these last minute tax planning ideas of if you want a tax projection prepared so that you can determine your cash flow needs or anticipated refund!