8 Year-End Tax Planning Tips 2014

Before you shutdown for the holidays, remember that just a few hours spent reviewing your financial life, may help boost your bottom line – and put a dent in your holiday shopping bills! Here are eight ideas to consider, which could minimize taxes before we ring in 2015. 1. Sell winners in taxable accounts. In 2014 married tax filers with taxable income up to $73,800 (singles up to $36,900) still have a zero percent tax rate on long-term capital gains and qualified dividends. If you are at the zero percent capital gains rate now, but expect your income to be higher later, you may want to realize capital gains today at the lower rate. Your taxable income includes the gain, so make sure that you factor that in when you make your decision.

2. Sell losers. If you have investment losses in a taxable account, now is the time to use those losers to your advantage. You can sell losing positions to offset gains that you have taken previously in the year, to minimize your tax hit. If you have more losses than gains, you can deduct up to $3,000 of losses against ordinary income. This is particularly useful, since your ordinary income tax rate is higher than your capital gains tax rate. If you have more than $3,000 of losses, you can carry over that amount to future years.

3. Avoid getting soaked by a wash sale. If you are starting to clean up your non-retirement accounts to take losses, don't get soaked by the "Wash Sale" rule. The IRS won't let you deduct a loss if you buy a "substantially identical" investment within 30 days, what's known as a wash sale. To avoid the wash sale, wait 31 days and repurchase the stock or fund you sold, or replace the security with something that is close, but not the same as the one you sold...hopefully something cheaper, like an index fund.

4. Bunch itemized deductions. Many expenses can be deducted only if they exceed a certain percentage of your adjusted gross income (AGI). Bunching itemized deductible expenses into one year can help you exceed these the 2 percent AGI floor for miscellaneous expenses. To exceed bunch professional fees like legal advice and tax planning, and unreimbursed business expenses such as travel and vehicle costs.

5. Mail your checks for deductible purchases. Procrastinator alert! If you're the type of person who waits until the last minute for everything, take note: To qualify for write-offs of charitable contributions and business expenses, your payments must be postmarked by midnight December 31. The IRS says just writing "December 31" on the check does not automatically qualify you for a deduction; and pledges aren't deductible until paid. Donations made with a credit card are deductible as of the date the account is charged.

6. Fully fund your college savings 529 plan. If you find yourself with a little extra year-end cash, or grandma asks what she can do for your kids, consider a 529 plan. Money saved in these programs grows tax-free and withdrawals used to pay for college sidestep taxes, too. You can invest up to $14,000 in 2014 without incurring a federal gift tax and many states offer state tax deductions for the contributions.

7. Give appreciated stock or fund shares to charity. Get in the holiday spirit, with the help of Uncle Sam. One way to lower your tax bill in April is to donate appreciated securities, like stocks, bonds or mutual funds, to a charity. If you itemize deductions, you'll write off the current market value (not just what you paid for them) and escape taxes on the accumulated gains. The low cost basis does not impact the receiving charity, as long as it is a tax-exempt organization.

8. Use your gift tax exclusion. You can give up to $14,000 to as many people as you wish in 2014, free of gift or estate tax. If you combine gifts with a spouse, you can give up to $28,000 per beneficiary, per year.

5 Year-End Retirement Tips for 2014

With just weeks to go before the end of the year, here are five potential money-making/money saving retirement moves to consider. 1. Fully fund employer-sponsored retirement plan contributions. Unlike IRA’s, the deadline for funding 401 (k), 403 (b) or 457 plans is December 31. This year, the limit is $17,500 per employee. If you over the age of 50, you can make an extra $5,500 as a “catch-up contribution”. Remember that a contribution into your employer-sponsored plan is an “above-the-line deduction,” which means that it is taken before you calculate your Adjusted Gross Income. I love above the line deductions because they are allowed in full -- many other deductions are phased out for high earners.

2. Consider converting Traditional IRA into a Roth IRA. A conversion requires that you pay the tax due on your retirement assets now instead of in the future. Whether or not a conversion makes sense for you depends on a number of factors, the most important of which is whether or not you can pay the tax due with non-retirement funds. If you have money available to pay the tax due, some advantages of conversion are: paying the tax at a lower tax rate, if you think that your tax bracket will rise in the future; eliminating the tax on future growth of assets; reducing future Required Minimum Distributions (RMD’s); and reducing the taxable amount of Social Security benefits. If you already converted your account this year, you may want to reexamine it. If the value went down, you have until your extended filing deadline to reverse the conversion. That way, you may be able to perform a conversion later and pay less tax.

3. Be aware of new IRA rollover rules.Starting in 2015, new rules apply for withdrawing and rolling over money from an IRA. Next year, you can only roll over an account once every 365 days (note: the rule specifies "every 365 days," not once a calendar year). The rule applies to IRA-to-IRA rollovers where the owner takes custody of the money him or herself. The rule does not apply to rollovers from employer plans to IRAs or to "trustee to trustee" transfers.

4. Take Required Minimum Distributions (RMDs). Generally, once you turn 70 ½, you must begin withdrawing a specific amount of money from your retirement assets (there are some exceptions). Remember, money that you have previously contributed to these accounts bypassed taxation - RMD’s ensure that the government taxes those funds. The penalty for not taking your RMD is steep -- 50 percent on the shortfall!

A few notes about RMDs: Even if you have multiple individual retirement accounts, you don't have to take the RMD out of each individual account. You are allowed to take one RMD from any of your retirement accounts, based on your age and the total value of the accounts. Also, filing a joint return doesn't mean you can take the entire amount for both spouses from one spouse's account - RMDs are calculated for each individual. Finally, if you inherit an IRA, check before year's end to see if you need to take an RMD on behalf of the deceased.

5. Consider a Qualified Charitable Distribution (QCD). Since its enactment in 2006, one way to sidestep the taxation on your RMD is to make a Qualified Charitable Distribution, which allows you to gift up to $100,000 directly from your IRA to a charity without having to include the distribution in your taxable income. However, you swap having to claim the income for making a charitable deduction. Not only does a QCD help avoid taxation, it also means that the extra income is not included in other tax formulas for Social and Medicare Part B premiums or for the Pease limitation on itemized deductions. As of this writing, lawmakers have not yet extended the QCD and while experts believe that it will be extended, you should be careful. If you choose to make a QCD, remember that the money must go directly to the charity, not to a private foundation or a donor-advised fund.