Five Year-End Tax Planning Tips

• Take Advantage of Donating Stock:
If you intend to make charitable contributions before year-end consider donating stocks directly to the charity. Instead of selling stock that has increased in value and donating the net proceeds, donate the stock directly. For stocks owned over a year, this allows you to get a fair market value donation while not reporting the capital gain on your return. Note, if the stock’s value has declined, do the opposite (sell it and donate the proceeds).

• Accelerate Deductions and Defer Income:
With tax rates unchanged, deferring taxable income into next year and accelerating deductions into this year is one key to proper tax planning. Consider deferring Self Employment income and bonuses and accelerating state and local income taxes, real estate taxes and deductible interest payments. But beware of alternative minimum tax.

• Bunch Itemized Deductions:
Many itemized deductions can only be deducted if they exceed a certain percentage of your adjusted gross income (AGI). Bunching itemized deductions into one year can help you exceed the AGI limitations. Bunch medical expenses to exceed the 10% AGI floor (7.5% for taxpayers age 65 and over). Bunch miscellaneous deductions such as unreimbursed business expenses and professional fees for estate and tax preparation and planning.

• Adjust Withholding and/or Estimated Tax Payments:
Double check your withholding and estimated tax payments to avoid underpayment penalties. You can adjust your withholdings (i.e. for year-end bonuses) to make up for any shortfall. Generally, to avoid the underpayment penalty, you will need to have paid in 90% of the current year’s tax liability or 100% of your prior year’s tax liability.

• Max Out Retirement Accounts:
It’s not too late to increase contributions to a retirement account. Contributions are tax deferred, and in some cases can be made by April 15, 2015. The 2014 contribution limits are $17,500 for 401K and $5,500 for an IRA (not including catch-up contributions of up to $5,500 for a 401K and $1,000 for an IRA.)

And Always, Always Keep Good Records.