The end of the year is fast approaching and as December 31st draws ever near, time to implement those smart, last minute tax strategies is running out. To help make sure you get the most out of your efforts this year, here are some tax tips from the professionals at Clayton, Paulk, and Associates!
Tax Tips for the End of the Year
2014 offers many familiar tax breaks you can take advantage of, alongside a few new ones you may not be aware of. These include everything from standard charity contributions to advice on The Affordable Care Act (ACA) or “Obamacare”, which could have an impact on certain tax payers.
Deferring Your Income
One of the simplest end of year tax tips we can offer you is this: if possible, defer your income. Not all tax payers will be able to pull off this crafty move, but if you find yourself nearing the upper portion of a tax bracket or want to try and avoid the net investment income tax – and you even have the option to defer your income – you may want to consider this option.
For example, if you are a freelancer and have not submitted invoices for completed work, you might be able to ask your employer to pay you after the new year. Be warned, however: if you anticipate you might make more money next year or even the same, you will find yourself in the same situation come tax season the following year.
Be Charitable and Giving
Sometimes you have to give in order to receive. We are not saying that should be your inspiration for gift-giving or charitable contributions, but if you do donate to charities, be advised that you can deduct certain contributions – just make sure you save all of your receipts, no matter how small. It all adds up!
If you have not donated yet this year, or are feeling extra generous, now is the time to do so. Similarly, as a single filer, you are able to gift up to $14,000 per year to any number of individuals (if filing married, you and your wife can double this number), reducing the size of your estate and possible estate taxes. These gifts can be in the form of cash, stocks, partial real estate, and even payments to medical or educational needs.
The Affordable Care Act and Taxes
Under the Affordable Care Act (ACA), individuals must have health insurance coverage or face a penalty of up to a maximum of $285. This penalty is due at the same time as your tax payment (if owed) and takes into account the amount of time you have been uninsured – each month you do not have coverage, you will owe 1/12 of the total yearly penalty.
Hire a Tax Professional or CPA
When in doubt, it is always best to consult with a certified tax professional, CPA, or accountant. They can advise you with regards to the best path you should pursue with your tax return and answer any questions you may have.