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3 Hot Tips to Reduce Your Taxes in 2014

Cut tax

So many of us are running around trying to get things in order for the holidays …Hanukkah, Christmas, and Kwanzaa, just to name a few. Taxes can slip our minds, and the next thing you know, we’re in 2015 and unable to do much to reduce our tax situations.

Here are 3 amazing ideas to do NOW that will help reduce your tax bill due next year.

  • Make a gift of cash. There are several things you can do that qualify to reduce your taxes or estate.
    • Make a tax-deductible donation to your favorite non-profit or charity. Who’s close to your heart? The Cancer, Heart, or Diabetes organizations seeking a cure? Stopping domestic violence, starvation, or contaminated water? Or helping addicts, runaways, and trafficked individuals, the homeless, special needs or foster kids? You can make a difference with your donations.
    • Give cash gifts to those you mean to help that aren’t non-profits. This will reduce your estate tax. Just remember the limit for this giving this year without a gift-tax assessment is $14,000 for individuals, or $28,000 is your married.
    • Invest in the futures of those you love through education, yours or someone else’s. — Opening a 529 plan and funding it before December 31, is a great way to go. The 529 account is a tax-deferred account that allows you to fund your own or your child’s or grandchild’s education.


    Nearly every state has its own 529, and as a result, they’re all unique. Most have some kind of restrictions or limits, so get on it NOW to find out if your state requires you to jump through a hoop or two.

    If you combine gift giving and funding an education, you can “front-load” a 529 with five years of tuition using your gift exclusion, totaling $70,000 individually or $140,000 for a couple. Again, check for contribution limitations on the account you’ve chosen to get involved in.

  • Target your retirement planning. Setting money aside NOW for your future is still doable. Check out these options:
    • If you have a 401(k), you can contribute up to $17,500 if you’re under age 50, and $23,000 if you’re 50 or over. If you haven’t hit the limit, ask your employer if it’s possible to add a lump sum to take you up to that limit.
    • You can still open a traditional IRA if you aren’t offered a retirement planning provision through your employer. The limits on contributions with this account are $5,500 if you’re under age 50 and $6,500 if you’re 50 or over. The account must be opened prior to the end of 2014, however, you can fund the account up until April 15, 2015. (Nice, huh?)

       

  • Review your investment portfolio for non-performing stocks, bonds, or securities that no longer suit you. As an advisor, we call this “tax harvesting.” When a stock or fund under-performs and creates a loss, it should be reviewed to see if it’s a position that no longer fits in with your investment policy. If that’s the case, you can acquire up to a total of a $3,000 deduction for investment losses offsetting the capital gains taxes on the winning positions you’ve liquidated already this year. It should be noted, that this only applies to taxable accounts and not tax-deferred, or qualified, accounts.

There’s a bunch of meat and potatoes in this little blog, so if you have questions or are unsure, ask your advisor. If you don’t have one, I’d be happy to help you.

Managing your money wisely gives you the most opportunity to build your wealth. That’s what I’m here for, to help you build your wealth.

If you feel you don’t have any wealth to build with, that’s a whole ‘nother blog. But allow me to encourage you to simply START. Put aside something each week, even if you if you consider it a meager beginning… at least you’ve begun! Millionaires are born from windfalls, generally. They’re made over time. You can be a part of that club with sound money habits, advice, and follow-through.

God bless you as you celebrate this season, and we’ll talk soon.

Remember, it’s your money, your rules, your way! Believe in YOU! I do.

Money Savvy Woman © 2014