By Tim Frye
Everyone knows that as tax time creeps closer the taxpayer’s stress level rises as January approaches. Tax planning and preparation is an incredibly stressful year-round process. However, if you haven’t done anything to prepare for your 2014 tax filing, don’t get your Dockers all in a bunch just yet. As we come upon tax season 2015 let’s take a look at some of the steps that you can take to cut your tax bill and lower your stress knowing that you did your best.
Should I Maximize Retirement Contributions?
If you are working for a company that offers a retirement plan that is inclusive to salary deferral features, for example a 401k plan or 403(b) plan, you may want to take a quick peek at how much you have in contributions so far for the year.
For 2014 your maximum salary deferral contribution is $17,500. For any taxpayer over 50 as of the last day of the year, they are permitted to make “catch up” contributions up to $5,500 for 2014. Taxpayers have until the end of the year to increase your salary deferrals if you have not been contributing at the max rate throughout the year.
And for the self-employed and have no non-owner employees who work for your business 1,000 hours or more per year, you should consider setting up a self-employed 401k plan by the last day of 2014. These business owners are permitted to contribute up to $16,500 plus 20% of their adjusted net profit or 25% of W2 wages up to a total of $49,000 for 2014. For taxpayers over 50 before the end of the year, catch up contributions increase that number to $54,000.
Sell Your Losing Investments
If you are an owner of a few investments in your non-retirement accounts that have experienced dips in value, don’t wait for them to peak again. It would be wise for tax purposes to ditch some of your losers, in that your capital losses can offset the taxes owed on capital gains realize during the year, this being inclusive to any capital gain distributions from your mutual funds. Taxpayers are then permitted to claim up to $3,000 in excess capital losses against any other wage income.
Should I Up My Charitable Contributions To Save On My Taxes For 2014?
Were you generous enough in 2014? If not there is still time, and not only will the karma come back to you, but Uncle Sam will reward you as well. Donations to charities are indeed deductible against taxable income come tax time. Go get your unused things cramped up in that closet and donate it before New Year, and you will be able to deduct these contributions at their FMV on your tax return. Remember to include a valid receipt and list the goods included in the donation.
For cash contributions make the donation by credit card before the end of the year and you can include it on your 2014 tax bill, even if you don’t pay the credit bill until later.
Appreciated investments can also be considered charitable contributions, and the value of the deduction is based on the value of the assets donated. Taxpayers will be able to circumnavigate the capital gains tax on the prior asset appreciation.
If you are looking for information on how to get prepared for tax year 2014, or are just interested in all things tax or tax preparation, go to Prontotaxclass.com and check out our blog section. We provide some of the best content out there to get you ready today!