2014 Year end planning
It's time to consider year end tax planning even though this year's tax rules aren't finalized yet. As usual, congress is waiting until the last minute to revive a series of tax breaks that expired after 2013.
The key to year end planning is simple. Consider both 2014 and 2015 as you weigh your options. You want to minimize your taxes over both years, not just one. Most taxpayers will save by accelerating deductions into 2014 and deferring income to 2015. If you anticipate being in a higher bracket next year, do just the opposite... accelerate income and delay deductions.
There are some areas where "timing" is readily available:
Prepay state income tax by Decembe 31, eiher via one time withholding or estimated pay. Accelerate charitable donations planned for 2015 into 2014 (or vice versa).
Pay the January mortgage payment on your residence before the end of the year.
Complete equipment buys before year end.
Accelerate paying expenses normally scheduled for January into December.
Defer billing from late December into early January.
Some taxpayers alternate in and out of the standard deduction from year to year. If your itemized deductions (state income tax, property tax, mortgage interest, donations, employee and investment expenses) are close to the $12,400 standard deduction, ($6,200 for single taxpayers) time the payments in order to "bunch" the itemized deduction ever other year.
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