If you want to keep as much money in your own pocket this year, rather than giving it to Uncle Sam, the first thing you need is a detailed and well laid out financial plan. Indeed, now is definitely the time to start getting serious about your year-end financial planning and put together a list of important things that you need to get taken care of before December 31. With that in mind was put together a list of 5 Key Questions that all taxpayers need to know in order to successfully put together a year-end tax plan. Enjoy.
Q 1) What’s the best time of year to start planning a year-end tax strategy?
Most financial experts will tell you that it’s best to start in September if you have complicated tax issues. That being said, starting in October or November is still better than waiting until December (or even late December) as that can sometimes limit your opportunities to defer or save taxes. Planning ahead is obviously something that’s quite vital in terms of at least knowing where you stand as far as your taxes are concerned.
Q 2) Is there anything I can do right now to lower this year’s tax bill?
There are number of things that the average taxpayer can do including deferring their year-end bonuses until January 2014, postponing the receipt of any distributions beyond their minimum requirement from any IRAs and also putting off exercising any stock options.
Q 3) What tax changes have been made that will affect me in 2014?
High income earners, especially married couples who are filing jointly and have a taxable income that’s over $450,000, are going to be looking at a new top marginal income tax rate of 39.6%. There’s also a 5% increase on long-term capital gains and qualified dividends. Any joint filers that earned over $250,000 also can expect the new 3.8% Medicare surtax to be levied on their net investment income.
Q 4) Should I offset capital gains by selling my underperforming stocks?
Minimizing the amount of capital gains taxes that you will pay by selling any stocks and/or mutual funds that have gone down in value can indeed be helpful. Of course talking with your financial advisor before making any decisions is a very good idea, so do that first. One extra plus is that the IRS will let you offset your capital gains with your capital losses on a dollar for dollar basis.
Q 5) What tax breaks will I receive from making charitable donations?
There are definitely ways to lower your taxes by making charitable contributions to a qualified organization. The most important information here is knowing which form to file as well as knowing exactly how to itemize your deductions. Donating appreciated property instead of cash is also an option and, even better, it actually allows you to deduct the property’s fair market value on the day that gifts and thus avoid paying any capital gains on the appreciation.
This Blog has simply touched on a number of the most important questions that you should be asking yourself and, frankly, your financial advisor. Quite a few things have changed in the tax laws, good and bad, and now is definitely the time to get started asking questions and making plans so that you can take advantage of any tax breaks available before their time limits kick in.
