Even though tax filing is not the first thing in the minds of the people during the holidays but it is definitely worth if you squeeze sometime before Dec. 31 in order to get hold of some effective tax reduction tips to save money at the time of filing your tax return in 2015.
Here, I have sketched out some tax planning advices that might be handy for your situation. However, you can also consult tax advisors to talk about your exact scenarios and to thrash out ways to reduce your overall tax obligations.
Defer your income
You can reduce your tax for 2014 by deferring earnings till 2015 and you can also speed up your deductions for the same. You can claim bigger credits, deductions and additional tax benefits for the next year which are being phased out in different stages of AGI like
€ child tax credits
€ student loan interest deductions
€ higher education tax credits
It is also better to speed up your income into this year. For an instance, if you intend to buy health insurance and you are entitled for premium assistance credit, then lesser income in 2015 will cause an elevated tax credit. If you are eligible for alternative minimum tax in this year you can minimise your adjusted gross income by deferring earnings to have your alternative minimum tax reduced.
Net Investment Income Tax
It’s significant to keep an eye on all your incomes from net investments to check whether you are accountable for NII tax. NII not only includes capital dividends and gains but it further includes earnings that you have made from any business where you are passively participating. To diminish the probable NII liability you need to chew over right strategies that can lower your earnings under the thresholds.
Make of the most of zero tax rates on capital gains
Since the highest federal income tax charge for long-term capital gains in 2014 is 20 percent you can avoid paying taxes on capitals gains if your taxable income that includes the profit comes within the range of 10 to 15 percent tax brackets. So, it is time to reassess all your portfolio assets and decide if you should take measures prior to the end of 2014.
If you have acquired net capital gains in 2014 you can minimise your tax by selling out those investments that would produce capital losses before the end of this year.
Donate stocks and shares to charity organisations
You can make your charitable contributions better by donating mutual fund shares or stocks instead of cash. By doing that you can be able to deduct your share’s value in fair market and can also evade income tax on capital gain permanently. In return, the charity or organisation you donate to will get the entire amount. In order to take the fair market value away you have to own the share or stock for over a year. This way you can deduct only up to 30 percent of your total AGI.
These are some of the steps you can make to lessen your tax burden. But it is wiser to consult tax advisers or financial planners about implementing these advices.