It seems we just move from one tax season to the next and this is true. In less than 5 months, we will all be pulling together receipts, financial statements and income documents to file for 2015 federal and state taxes. Before it is too late to take advantage of tax breaks, meet with your personal accountant and tax professional. Here are 4 ways that you can minimize this year’s tax burden.
- Meet with an Accountant. The importance of this cannot be overstated. Every individual’s financial situation and tax situation is different and while there are tax strategies that can help many people, it is vital to get strategies that are directed to your particular situation. The 2014 tax code is 73,954 pages – there is virtually no way you can analyze the best solutions and deductions on your own.
- Max out Retirement Plans. If you have a 401(k) through your job, it is important to max out your contributions. This is particularly important if your employer offers matching of funds. Don’t miss out on this “free” money for your retirement. In addition, if you have a traditional IRA, be sure to make the maximum contributions allowable. Remember, 401(k)s and traditional IRA’s are tax deferred accounts meaning that you do not pay taxes on the earnings until funds are withdrawn.
- Create your Estate Plan. When was the last time you updated your estate plan and wealth transfer goals? It is time to take a look at your goals and your current financial status. With the help of your personal accountant, you can determine whether it will be advantageous to start giving part of your estate now. For example, did you know that you could gift up to $14,000 per recipient without incurring any federal gift tax? If you are married, you can double that amount each year. There are lifetime caps and this solution isn’t right for everyone, so it is important to talk with a tax professional to guide you in the right direction.
- Give to Charity. While cash, vehicles and personal property are often given to charity, did you know that IRS designated nonprofit organizations can accept stock and other “illiquid” assets? There are several rules where this is concerned, so seek professional advice prior to gifting. Generally speaking, stocks and other investments can be gifted to a nonprofit organization if you have owned the asset for a minimum of 12 months, and during ownership it has appreciated in value. Donating to charity not only helps the world around you it also lowers your overall personal tax burden.
Before we know it the holiday season will be upon us. Right after that the tax season will start. Don’t wait too long to get your financial house in order; the sooner you start preparing for the 2015 tax season, the better the outcome.
