When it comes to tax planning, preparation starts in December for those looking to make the most of tax breaks and deductions offered now. By talking with your tax relief advisor, you can understand exactly what liabilities concerning taxes are before the year ends and make sure that you get the maximum amount of tax relief possible.
There may be some financial moves you need to make now, before the end of the year, in order to save you when you file your tax return next year. If you’re fortunate enough to have access to a financial advisor or tax accountant now, here are a few questions you should ask as soon as possible:
- Should I defer or accelerate income? Knowing what tax Tax Advisors bracket you will be in makes all the difference in the world. For instance, if you are going to be in the lower tax bracket, you may want to consider deferring bonuses received at the end of the year (at least until 2014). You will also want to postpone Individual Retirement distributions and/or delay on exercising any non-qualified stock options.
- Are there losses or gains I should take? If you have gains and are a part of the lower tax bracket, you should probably sell your investments what are doing well. Enjoy the low taxes while the earnings allow you to.
- Are there any charitable contributions I should be involved with? The higher the income, the smarter it would be to take more charitable deductions. This would put you closer and closer to a lower tax bracket. On the other hand, if you are unemployed, pushing end-of-year giving to next year will profit you extensively. If unrealized gains are involved, giving that appreciated stock over as a donation would be the most simple of answers. Gifting appreciated securities will allow you to avoid taxes and you can deduct the whole amount of the donation.
- Is there an issue with interfamily gifting? Absolutely not! You can give up to $14,000 to one person or $1,000 – the number doesn’t matter. If you want to give a gift that can’t be taxed, do so by giving them $5,500 (which is the same amount as a Roth IRA contribution).