Five Smart Year-End Tax Moves

by Gerri Willis

Right now is the best time to lower your tax bill for your 2014 filing next April. In fact, after today, you only have 17 days to reduce your tax liability.

"Once you pop the champagne bottle, scream happy new year and give your significant other a kiss at midnight, almost all of your tax planning strategies are lost, if you haven't already implemented them," says John Vento, president of Comprehensive Wealth Management and author of "Financial Independence, Getting to Point X."

The best way to plan is to consider ways to reduce your 2014 taxable income. Here are five ideas for doing just that:

1.)    Sell your losers. If you invest in individual stocks outside a retirement plan and have enjoyed widespread gains, analyze your portfolio to identify any losers you have. If you sell those losers you can use the capital losses to offset your capital gains, plus you can take an additional $3,000 in losses against your other income. You can buy back those losers next year if you plan to hold them for the long term. Avoid tripping IRS wash sales rules by buying the same securities 30 days after when you sold them.

2.)    Delay taking your bonus. One easy way to reduce your 2014 income is to get your boss to delay giving you your bonus until 2015. That way your bonus won't show up as 2014 income. If you are self-employed, don't send out invoices until after the first of the year.

3.)    Set aside more for retirement. Most people don't contribute the maximum they are eligible for to their workplace retirement fund. According to the IRS, contribution limits are $17,500 for 2014 and $18,000 for 2015. Catch up limits for workers 50 and older are $5,500 for 2014 and $6,000 for 2015. Check the rules for contributing to your 401(k) to make sure you can modify contributions at any time. Remember, money to your 401(k) or an IRA comes out before you pay taxes (as long as you are within contribution limits). Why not pay yourself before paying Uncle Sam?

4.)    Give to charity. If you are already planning to give money to your favorite charity, now is the time to do it. In addition to cash, you can also give household goods, clothing, even a car. But before you send that old junker off, talk to a tax professional to  make sure you are doing it the right way. Vehicle contributions are often scrutinized by the IRS.

5.)    Pay your tuition bill early. If you've got a child in college, your spring semester bill isn't likely due until January, but it may be worthwhile to pay it now. Early payers can claim the American Tax Credit on their 2014 return. The credit is worth up to $2,500 and up to 40 percent of it is refundable, which means you could get back as much as $1,000 as a tax refund if you don't owe taxes. You can claim tuition, fees and course materials.

6.)    Finally, don't leave any money on the table. Be sure to use any money you've set aside in your flexible spending account at work. Like a 401(K), FSA money goes into the account before taxes, but if you fail to use the money in the same year as it is contributed, you could lose it. Plan ahead and make April 15 the best it can be!

Things to Do Right Now to Save on Taxes Next Year

by Gerri Willis

By Gerri Willis

If you're smart about your money, you've probably already started thinking about what you can do before the year ends to reduce your tax bill. There are lots of changes awaiting taxpayers April 15 thanks to the Affordable Care Act and the American Taxpayer Relief Act of 2012, not much of it good.

First things, first. If you have a large portfolio or earnings above $200,000, now is the time to run a simulation of what your taxes may look like for next year. That way, you can at least get a sense of what you'll be on the hook for come April 15, 2014.

Next, if you're expecting a bonus or year-end income that will push you into a higher bracket, consider deferring that money into next year. Hold off selling assets that will produce a capital gain. If you're self employed, don't send out invoices for year-end jobs until early next year. Keep in mind, high earners are facing a new top tax bracket of 39.6 percent on taxable income of $400,000 for single earners and $450,000 for married couples.

Even if you aren't in the top tax bracket, it makes sense to salt more money into your 401(k). That will reduce your income reported to the IRS since most plan contributions are made before taxes are taken out. Remember if you are 50 or older, you can put in an extra $5,500 over the $17,500 limit.

Now is also a good time to review the limits on your flexible spending accounts. Under Obamacare, the limit on the amount you can set aside pretax was set at $2,500. (Before the ACA, there was no statutory limit on contributions.) Some companies allow a grace period to use untouched FSA funds, but not all. Plus, the Treasury recently announced changes to the use-it-or-lose-it rule. Now, account holders can carry over up to $500 in excess money into the next benefit year, as long as your company adopts that plan.

Also important to consider: The chances of mutual funds passing on long-term capital gains distributions are high. Fund companies release estimates of distributions this month. If you're planning on selling a fund do it before distributions.

Now is also the time of year to consider charitable contributions. Make sure your contributions go to an eligible 501(c)(3) organization so that you can take the deduction.

Don’t miss a special User's Guide to Taxes on The Wills Report starting 6 PM ET tonight on FOX Business!

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