| NEW YORK, Sept 3
NEW YORK, Sept 3 When everyone else starts
loading their backpacks and shopping the back-to-school sales, I
know it is time for me to dive back into TurboTax.
That's because fall is the perfect time to plan my approach
to the tax forms I won't file until next April. By using the
next four months strategically, I may be able to reduce the
amount I have to pay then.
This is a particularly easy year to do tax planning, because
the rules haven't changed much from 2013. If you do your own
taxes on a program like Intuit's TurboTax or TaxAct, you can use
last year's version to create a new return using this year's
numbers, and play some what-if games to see how different
actions will affect your tax bill.
If you use a tax professional, it's a good time to ask for a
fall review and some advice.
Here are some of the actions to take now and through the end
of the year to minimize your 2014 taxes.
- Feed the tax-advantaged plans. Start by making sure you're
putting the maximum amount possible into your own health savings
account, if you have one associated with a high-deductible
health plan. That conveys maximum tax advantage for the long
term. Also boost the amount you are contributing to your 401(k)
plan and your own Individual Retirement Account if you're not
already contributing the maximum.
- Plan your year-end charitable giving. You probably have
decent gains in some stocks or mutual funds. If you give your
favorite charity shares of an investment, you can save taxes and
help the charity. Instead of selling the shares, paying capital
gains taxes on your profits and giving the remainder to your
charity, you can transfer the shares, get a charitable deduction
for their full value and let the charity - which is not required
to pay income taxes - sell the shares. Start early in the year
to identify the right shares and the right charity.
- Take losses, and some gains. If you have any investment
losses, you can sell the shares now and lock in the losses. They
can help you offset any taxable gains as well as some ordinary
income. You can re-buy the same security after 31 days, or buy
something different immediately. In some cases, you may want to
lock in gains, too. You might sell winners now if you want to
make changes to your holdings and have the losses to offset
- Be strategic about the alternative minimum tax. Did you
pay it last year? Do you have a lot of children, medical
expenses and mortgage interest payments? If so, you may end up
subject to the alternative minimum tax, which taxes more of your
income (by disallowing some deductions) at a lower tax rate.
Robert Weiss, global head of J.P. Morgan Private Bank's Advice
Lab - a personal finance strategy group - says there are
planning opportunities here. If you expect to be in the
alternative minimum tax group, you can pull some income into
this year - by exercising stock options or taking a bonus before
the year ends - and have it taxed at the lower AMT rate. It's
good to get professional advice on this tactic, though - if you
pull in too much money you could get kicked out of the AMT and
the strategy would backfire.
- Look at the list of deductible items and plan your
approach. Many items, such as union dues, work uniforms,
investment management fees and more are deductible once they
surpass 2 percent of your adjusted gross. Tax advisers often
suggest taxpayers "bunch" those deductions into every other year
to capture more of them. Check out the Internal Revenue
Service's Publication 529 (here)
to view the list, and try to determine if you want to amass
your deductions this year or next. Then shop accordingly.
(Linda Stern is a Reuters columnist. The opinions expressed are
her own. The Stern Advice column appears weekly, and at
additional times as warranted. Linda Stern can be reached at
email@example.com; She tweets at www.twitter.com/lindastern
.; Read more of her work at blogs.reuters.com/linda-stern;