It’s that time of year again, the time when we all work hard, get our last minute shopping done, attend countless social events and prepare ourselves for another New Year right around the corner. Before you finish up 2014 though, take a moment to consider some year-end tax planning ideas.
Roth IRA Conversion
It’s a great strategy to help reduce your tax burden during retirement. This can also help with wealth transfer to your beneficiaries. This does create taxable income so be mindful of the tax that will be due, plus be sure not to trigger a ripple effect on other potential tax items. A tax projection by your advisor is important before taking this step.
Tis’ the season! If you itemize your deductions on Schedule A, you may be eligible to write off you’re your Cash and Noncash charitable contributions. Clean out your closets, drawers, garage, attic, etc. If you find gently used items that you no longer use, donate them to a charitable organization that will accept them. Every year, my wife and I donate countless items to Goodwill. We keep a detailed list of what we donated and are sure to get a receipt from Goodwill for these items.
Additionally, it may make sense to make any last second contributions to a charity of your choice. Or, if you need the deduction and are charitably inclined, a donor advised fund may make a lot of sense. This fund allows you to set aside charitable dollars this year (and take the deduction!), while waiting to allocate those specific dollars to charity at a later date (next year and beyond!).
Accelerate Income Tax Deductions
You are going to pay that next real estate tax bill in January anyhow; maybe it makes sense to pay it in December to get the tax deduction this year! If you are having a big year for income, then accelerating your deductions may make a lot of sense. Another way to do this is by accelerating your charitable gifts (see above).
Increase Your Exemptions
You need to be married by December 31st to file jointly and claim the additional exemption. Hurry up, there’s only about 25 shopping days left for this one!
Any tax savings strategy you opt to consider should be evaluated by your professional advisors. Time is running out, but it’s not too late to consider some of these options to save you some money next April 15th.