It’s time to start making your year-end plans even though this year’s tax rules are pending in Congress and not yet finalized. Lawmaking tax writers are waiting until the last minute to revive a series of tax breaks that lapsed at the end of 2013. These include the deduction for state sales taxes in lieu of income taxes and direct transfers from IRAs to charity up to $100,000 for people age 70 ½ and up. Despite the lawmakers’ reluctance to take action until after Election Day (Nov. 4) we believe many of the tax breaks will be renewed for 2014 and 2015.
The key to end-of-year tax planning is to weigh your options for both 2014 and 2015. You want to minimize the tax impact for both years, not just one.
Some taxpayers can accelerate income into 2014 to take advantage of a lower income and tax bracket, while other taxpayers may be able to defer income into 2015 for the same reason.
State and local income tax are itemized deductions. The decision to pay, underpay or overpay can affect either year depending on your situation.
There are a number of other deductions such as interest, charitable donations, and medical expenses that need to be considered.
Knowing your tax position before the holidays is always a good idea. Contact your Wealth Advocate to discuss your income tax concerns and end the year with a reliable plan.