Year End Tax Moves

It’s That Time Again: Year end Tax Moves

While 2013 will be full of surprises as new tax laws are felt for the first time, there are still opportunities to reduce your tax obligation now and into next year. Here are some ideas worth looking at.

1. Make effective use of capital gains and losses.Remember short-term capital gains (assets held less than one year) have a maximum tax rate of 39.6% while the maximum long-term capital gain tax rate moves to 20%. Plus there is a potential bonus Medicare tax of 3.8% if your income exceeds $200,000 single and $250,000 married.

Action to take:

  • Net capital losses against short-term capital gains if possible. Also remember you can net up to $3,000 in excess capital losses against ordinary income.Consider maximizing your child’s unearned income potential prior to the impact of the “kiddie tax” (usually up to $2,000 of unearned income can be taxed at your child’s rate).
  • Review your portfolio and consider the appropriateness of taking long-term gains now versus holding the investment.

2. Last minute charitable donations.Now is the time to finalize your charitable donations. Remember you must always have a receipt (cash donations are no longer deductible without one) and only donate non-cash items in good or better condition. Donations of $250 or more also require an acknowledgement from the charitable organization.

Action to take:

  • Make any last minute donations and collect all applicable receipts.
  • Consider donating appreciated stock to gain additional tax benefits. If you are considering this alternative, it is always best to seek qualified advice prior to making this donation.

3. Fund your retirement accounts.Remember you can still make donations to qualified retirement accounts. Some accounts, like Traditional IRAs and Roth IRAs allow making contributions through April 15th as long as you qualify.

Action to take:

  • If possible, fund your accounts up to the maximum allowable. Don’t forget to take advantage of the catch-up provisions if you are age 50 or over.
  • Consider making contributions this year versus next to minimize your taxable income.

4. Run through other year-end checklist items.

Action to take:

  • Take Required Minimum Distribution from retirement accounts if you are over the age of 70 1/2.
  • Rebalance your investment portfolios as necessary
  • Review any medical and dependent care spending accounts to ensure you do not lose any unspent funds
  • Make contributions to your retirement savings accounts, especially if you are self-employed
  • Consider last minute retirement account conversions, if appropriate
  • Consider donating appreciated stock versus writing a check to a favorite charity
  • Estimate your tax liability and make any required estimated tax payments
  • Make any final gift payments while being aware of the annual gift giving limits
  • Start collecting and organizing your tax records

As a final note, please consider that the unsettled atmosphere in Congress is sure to result in additional tax changes in 2014. So stay alert to those that may impact you.

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Preview of Key 2014 Tax Figures

While official numbers for 2014 are not yet released by the Internal Revenue Service (IRS), many figures are based on formulas set within the Internal Revenue Code (IRC) and use the Consumer Price Index (CPI) published by the Department of Labor. They are noted here for your planning purposes:

Tax Brackets: While the actual income brackets for tax rates are not set for 2014, the rate of inflation that impacts the income levels for each tax rate is anticipated to raise the income brackets by approximately 1.7-1.8%. Please recall that beginning in 2013 there is a new 39.6% income tax rate in addition to a new Medicare surtax.

Personal Exemption: $3,950 in 2014 ($3,900 in 2013)

Standard Deductions:
Tax Year 2014 2013
Single $6,200 $6,100
Head of Household 9,100 8,950
Married filing Joint 12,400 12,200
Married filing separately 6,200 6,100
Dependents 1,000 1000
65 or blind: married Add $1,200 Add $1,200
single Add $1,550 Add $1,500
Other Key figures:
Tax Year 2014 2013
Estate Gift tax exclusion $5.34 million $5.25 million
Annual Gift tax exclusion $14,000 $14,000
Roth and Traditional IRA Contribution limit 5,500 5,500

Caution: Remember, these are early figures using the recently announced Consumer Price Index. Official numbers are released by the IRS later this year.

 

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The shutdown, the IRS and your taxes

Government Shutdown, the IRS and taxes

The current October 15th due date still in effect for filing tax returns.

Taxpayers should continue to file and pay taxes during a lapse in appropriations as they would under normal government operations. Individuals who requested an extension of time to file should file their returns by Oct. 15, 2013. Taxpayers can file their tax return electronically or on paper, though the processing of paper returns will be delayed until full government operations resume. Payments accompanying paper tax returns will still be accepted as the IRS receives them. Tax refunds will not be issued until normal government operations resume.

All other tax deadlines remain in effect, including those covering individuals, corporations, partnerships and employers. The regular payroll tax deadlines remain in effect as well. Penalties and interest still apply for all late filings not received by the regular deadlines.

Further Reference:

 

 

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