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Nov
Time for Year-End Tax Planning
As the year draws to a close and we’re preparing for the holidays, it’s a good time to start thinking about your year-end tax filing. While it’s understandable that most of us don’t want to think about it, there are some benefits to doing some year-end planning. In particular, there are a few things you should take into consideration including:
- Charitable contributions
- Retirement plan contributions
- Health care spending account balances
- Capital gains and losses
- Year-end gifting to family
Those who pay attention to these five areas may be able to reduce their tax burden. Here’s what you need to know about these areas of tax planning.
Planning Charitable Donations
Only those donations which are made by December 31 may be claimed on your tax return. Keep in mind, it’s not only monetary donations you can count, goods and services (for business owners) may also be used to reduce your tax burden. Keep good records and make sure if you are donating property you use realistic values.
Retirement Plan Contributions
Employees who have 401(k) plans through their employer may only contribute additional funds through December 31. However, other contributions including IRA “catch up” contributions may be made through April 15. If you have questions about the limits on annual contributions, reach out to a taxation specialist for assistance.
Your Health Care Spending Accounts
While you can have a balance of $500 carried over to next year, if you have excess of this amount in your account, you need to use the balance before December 31. While you can withdraw the excess funds, keep in mind if they are not used for medical costs there will be a 20 percent penalty. However, dental work you’ve been putting off, new eyeglasses and annual physicals are good ways to use any excess funds.
Capital Gains and Losses
This is a good time to review any stocks you have sold throughout the year and determine any capital gains you have made. Take a look through your current portfolio and find the losses that can be used to offset those gains which will help minimize your tax burden. While it is generally not advised to base your portfolio on your taxes, it is always a good idea to review your portfolio and rebalancing your positions as you get another year closer to retirement.
Gifting From Future Estate
Year end is a good time to consider making gifts to family members. These gifts can take the form of educational gifts or gifts towards buying a home. Remember, an individual can gift up to $14,000 to a single person and they do not have to pay taxes on it. A couple can gift up to $28,000. This also helps reduce the tax burden on heirs who are settling your estate.
Rue & Associates has tax professional on staff who can help provide guidance to individuals including those who have small businesses. We all have an interest in reducing our tax burden but remember that January is too late to start planning for your tax bill in 2015. Contact Rue & Associates for all your Richmond tax planning needs. We can be reached online or by calling 1-804-730-7455.