With the New Year 2015 fast approaching, there are some year-end tax challenges and opportunities that need careful review. Here are some tax-saving tips that will help save taxpayer money if acted upon before year-end.
Review unrealized loss positions within investment accounts and consider realizing the losses. For example, you can sell the original holding then buy back the same securities at least 31 days later. Consider postponing income until 2015 and accelerating or deferring expenditures into 2014 as your deduction will be reduced or lost if your adjusted gross income (AGI) exceeds a certain threshold.
If you plan to make charitable donations, consider donating appreciated capital gain assets that have been held for more than one year rather than cash. You could thus receive a charitable deduction for the full fair market value of the assets, avoiding the capital gains tax and the 3.8% net investment income tax you would otherwise have incurred had the assets been sold. Consider converting traditional-IRA money invested in beaten-down stocks (or mutual funds) into a Roth IRA if eligible to do so. Keep in mind, however, that such a conversion will increase your AGI for 2014.
If you are eligible to make health savings account (HSA) contributions in December of this year, you can make a full year’s worth of deductible HSA contributions for 2014. This is true even if you first became eligible on December 1, 2014. Make gifts sheltered by the annual gift tax exclusion before year-end to save gift and estate taxes. The exclusion applies to gifts of up to $14,000 in 2014 made to each of an unlimited number of individuals, but you can’t carry over unused exclusions from one year to the next.
Consider using a credit card to pay deductible expenses before the end of the year. Doing so will increase your 2014 deductions even if you don’t pay your credit card bill until after the end of the year. Bunch medical expenses into tax years when they’ll exceed 10 percent of your AGI (or 7.5 percent of your AGI if you’re over age 65). These medical expenses are not reduced by the itemized deduction phaseout.
More than ever, taxpayers need to be aware of cross-border factors that can impact their taxes. For example, US taxpayers living outside the United States need to be alert to special issues in their estate planning, while US taxpayers with noncitizen spouses have special issues of their own to address. Unique tax considerations also arise when individuals immigrate to or expatriate from the United States. In addition, while many cross-border investments and transactions might appear standard, they can involve unforeseen complexities in tax reporting.
We at GKM would be happy to discuss with you any year-end planning questions you may have. For more information, or for answers to any questions, you may have, please contact us at info@gkmtax.com.