Top 10 Tax Planning Tips for Year-End

No year-end newsletter by a CPA firm would be complete without a Top 10 Tax Savings list.  Below is a list of our best tips for minimizing your tax burden with tax savings strategies:

  1. Defer income or accelerate deductions
    It may make sense to defer income such a bonus or capital gain. Just as it may make sense it the given year to accelerate your deductions into one year where you will receive a bigger benefit
  2. Harvest capital losses
    If you have incurred capital gains, you may want to review your portfolio and recognize losses to offset those gains.
  3. Maximize your business expenses
    If you are self employed or have rental properties, make sure and gather up all unreimbursed business expenses
  4. Make Roth IRA Conversions
    You may want to review whether it makes sense to convert some or all of your traditional IRA to a Roth. You pay the tax now but all future earnings are tax free.
  5. Maximize Retirement Plan Contributions
    Make sure to maximize your retirement plan contributions whether through your employer which reduces taxable wages or a SEP for those that are self employed. Also if you can deduct and IRA contribution that will help reduce your AGI
  6. Utilize Pre-tax Savings Plans
    Like retirement plans contributions which reduce AGI you can also make contributions to an HSA or participate in your companies FSA to reduce income
  7. Time State Tax Payments
    Looking at deductions—you can pay in all your state taxes by December 31st to get the deduction in 2014 but you will want to discuss with us to make sure you receive the maximum benefit. If you currently pay alternative minimum tax it probably will not make sense
  8. Make Charitable Contributions
    If income it up you may want to consider making additional charitable contributions. These can be cash or you may want to consider donating low basis stock
  9. Make your year-end gifts
    Making your annual exclusion gifts ($14,000) by year end is a great planning tool to get assets out of estate and pass it on to other family members
  10.  Reduce taxable income held in trusts
    As we saw trusts are taxed at the highest bracket when income reaches $12,000. We may want to discuss distributing income out to the beneficiaries. It will be taxable to the beneficiary but they may be a much lower bracket than the trust.

If you have specific questions, please contact your Anders Advisor. Be sure to read more about Tax Planning in the upcoming Table of Experts Section in the St. Louis Business Journal on December 26 featuring Anders Tax Partner John Lindbloom.