Year-End Tax To-Do’s
A New Year is hastily approaching, and 2014 will soon be a memory. Still, when it comes to taxes, 2014 will be on our minds until April 15. Because of this, now is the time to double-check you have made use of the deductions available to you.
Need some thoughts? Here are a few.
- Max Out IRA. If you have not yet contributed the greatest dollar amount to your IRA and are in position to put in additional monies, act soon. Individuals under 50 years of age can put in up to $5,500, and individuals 50 and over can put in up to $6,500. Actually, when it comes to IRAs, you can still add money through the tax-filing deadline and take the deduction for 2014 (using the premise you are qualified, of course).
- Max Out 401(k). In 2014, people under 50 years of age may contribute up to $17,500 to a 401(k), and people over 50 may contribute up to $23,000. Thus, if you want to max out this plan and have not done so, talk to your benefits manager about increasing your contribution percentage before year-end (remember to change it back in January 2015, though).
NOTE: You may be unable to take both an IRA and 401(k) deduction, so be sure to check with your accountant and/or financial advisor for particulars.
- Make Charitable Contributions. You sometimes donate clothing, household items, and/or furniture to aid organizations? You have beloved causes and occasionally confer gifts of cash and/or stocks to charities you trust? Well, if you have not yet done this and hope to get a 2014 deduction, give before the year is over (and be sure to get a receipt!). The charities you choose must have tax-exempt status under section 501(c)(3) of the Internal Revenue Code to get the deduction. A tax expert can help you determine the maximum amount permissible, based on your earnings.
- Draw Minimum Required Distributions. If you are at least 70 ½ years of age or older and you have an IRA or 401(k), you must take your minimum distribution or possibly face considerable IRS fees. Clearly, no one wants to be hit with penalties. A financial advisor can help you calculate the allocation you need to receive before another year arrives.
- Take Losses. So, you’ve done pretty well on certain stocks this year and have more gains than you expected? You also have a few losers you do not anticipate will recover to the level you would like? Then, you might want to consider selling a portion (or all) of the stocks with losses to offset the capital gains. Naturally, this approach is not right for everyone. Consequently, it is always best to talk to an accountant and/or financial advisor before engaging in this kind of strategy.
- Spend Down Your FSA. A flexible spending account is typically a use it by the end of the year or lose it arrangement, although there are exceptions in certain circumstances. As many know, FSA accounts are pre-tax dollars, but if you forfeit $500 of the money you put in because you failed to use it, you are not doing yourself any tax favors. Fortunately, FSA funds can be spent in diverse medical areas, often including reading glasses, dental work, and medical supplies.
Year-end taxes? Individual situations vary, but utilize your allowable deductions!