Tax Tips for Individuals 1- Bunch your deductions If you are close to the cutoff point between itemizing and taking the standard deduction, consider the advantage of bunching your deductible expenses every other year. You can then alternate between itemizing one year and taking the standard deduction the next, saving tax dollars by doing so. 2- Check exposure to the AMT This parallel tax system was created to keep wealthy taxpayers from avoiding taxes. But the AMT sometimes affects middle income taxpayers. With awareness and planning, you may be able to lessen the AMT’s impact on you. 3- Monitor adjusted gross income Another tax planning strategy is to reduce adjusted gross income (AGI). One way to do this on your personal tax return is to maximize above-the-line deductions. Above-the-line tax savers include such items as retirement plan contributions, student loan interest deduction, and the health savings account deduction. 4- Set up a retirement plan When you have a business, contributions to a self-employed retirement plan also reduce AGI above-the-line. APN, CPA can help you find the best retirement plan for your situation, and make the maximum allowable contribution each year. 5- Manage asset policies In 2014, business individuals can claim an additional first- year deduction 50 % bonus depreciation for business assets. Also, taxpayers allow to immediately deduct, the cost of qualified assets through Section 179 expensing deduction of $500,000 with a $2 million overall investment limit. 6- Consider a health savings account (HSA). Investing in an HSA gives you a current-year tax deduction while providing a savings account to use to pay out-of-pocket medical expenses currently or in the future. And be aware that you can fully fund your HSA up to April 15 of the following year 7- Beat the kiddie tax. If you are saving for a child’s college education, consider contributing to a 529 plan education savings accounts, and education saving bonds, which can limit exposure to the kiddie tax on unearned income. 8- Use the new Simplified home-office rules. Starting in 2013, the IRS provided an optional safe-harbor method that make it easier to determine the amount of deductible home office expenses. APN, CPA help you to determine if a home office deduction is allowable and ensure that you get the largest tax deduction possible. 9- Use this years annual gift tax exclusion Finalize any annual gifts youre making for 2014 by December 31, 2014. There is no gift tax on gifts of up to $14,000 per recipient. Married couples can make joint gifts of up to $28,000 per recipient. 10- Use your credit card to pay tax-deductible expenses By December 31, if youre short of cash. You can deduct the expenses on your 2014 return even though you pay your credit card bill in 2015. 11- Maximize dependency deductions. If you are helping to support an elderly parent, your college-age child, or others, know the requirements that will give you a dependency exemption. Keep your college student qualified as your dependent by meeting the support test. Your child cannot provide over one-half of his or her support during the year. Add up funds your child received from work, student loans, and other sources of income. Consider the need to increase your level of support before year-end in order to claim exemption. 12- Minimum Required Distributions from retirement plan If you’re required to take distributions from your retirement plan, do so by December 31, or you face a 50% penalty. If you just turned 70½ this year, you could wait until April 1, 2015, to take the first distribution. 13- Check your basis in an S corporation. If you are an S corporation shareholder, your basis in the company will determine whether you can deduct current-year losses or not. Review your basis now to give yourself time if necessary to re-establish a basis and avoid surprises at tax-filing time. 14- Consider tax-exempt investments as a means of cutting your income tax: There is an easy way to compare the yield on tax-exempt investments (such as municipal bonds) with an after-tax yield from taxable investments. Subtract your top tax bracket from 100 and divide the tax-exempt rate by that number. The result is the equivalent taxable return. 15- Don’t lose your mortgage points deduction: When you refinance a mortgage, you are required to deduct the points over the life of the loan. But if you refinance again or sell the home you can write off the remaining un-deducted amount in that year. 16- Take advantage of lower long-term capital gains tax rates: You can cut your tax bill significantly by holding an appreciated investment long enough to qualify for long-term rather than short-term tax treatment. 17- Contribute to a Roth IRA: Consider a Roth IRA if you qualify for one. The beauty of a Roth is that your investment grows tax-free, and qualified withdrawals from a Roth will be completely tax-free. 18- Rollover pension distributions: If you receive a lump-sum distribution from a qualified retirement plan, consider deferring taxation on the distribution by rolling it into an IRA or other qualified plan within 60 days. 19- Look into tax-deferred exchange when selling real estate or investment property: If you plan to sell a piece of investment real estate and replace it with another investment property. You should look into a tax-deferred exchange. 20- Check into all the tax credits: Check all tax credits you might qualify, because some tax credits are reduced or eliminated entirely once your income reaches certain limits, beware of the phase-out income thresholds for the credits that affect you. With some minor adjustments to your income and deductions, you might be able to salvage all or part of a valuable credit.
Posted on: Thu, 01 Jan 2015 22:39:00 +0000
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