Submitted by: Michael Brady, Senior Tax Manager, Marcum LLP
Believe it or not, 2014 is quickly drawing to a close. With few exceptions, December is your last best chance to take action that can manage your tax bill. Below are a few simple strategies worth considering.
Accelerate the payment of deductible items – cash-basis taxpayers (individuals and businesses) who make payments prior to year-end can deduct those payments on their 2014 tax returns. Some excellent types of payments for individuals to consider include state income tax payments, charitable contributions, and medical expenses. Be aware of the effect of the dreaded alternative minimum tax, which can reduce or eliminate the tax benefit of certain expenses. And think outside the box; if your tax situation calls for it, you may want to defer certain payments (and the related tax deduction) until next year to ease your tax bill.
Consider a Roth IRA conversion – converting funds held in a traditional IRA to a Roth IRA does result in the value of the conversion being taxed as ordinary income in the year of conversion. However, there are some great benefits to a Roth IRA, such as tax-free (not tax-deferred) growth and distributions, and no required minimum distributions.
Review your capital gains and losses – in order to avoid an unwelcome surprise come tax time, make sure you know where you stand as far as realized gains and losses are concerned. Gains can be offset by capital losses, so it may be a good time to “harvest” losses sitting in your portfolio. You can even buy the securities back after harvesting the losses, as long as you wait at least 31 days. Remember, only $3,000 of net capital losses can be used to offset ordinary income each year.
A qualified tax advisor can help you navigate the complex tax rules and keep more of your money.
If you have questions regarding these tax tips, please feel free to email Michael Brady at Michael.brady@marcumllp.com
