Conventional wisdom holds that springtime is tax season, but effective tax planning is a year-round activity. There's never a bad time to take steps to minimize your tax bill and keep more of what you earn. Consider these tax-saving tips and strategies:
Max out your retirement contributions.
One of the smartest ways to reduce your tax bill is by socking away the maximum allowable amount in your tax-deferred retirement accounts. You can contribute up to $5,500 to a Traditional or Roth IRA (remember that 2014 IRA contributions can be made until April 15, 2015) and up to $18,000 to a 401(k) as well as to a few other employer-sponsored plans. If you're older than 50, the limits increase to $6,500 and $24,000, respectively. Not only will the earnings on your money grow tax-deferred, contributions may be deductible.
Delay your bonus.
Expecting a year-end bonus? Find out if it can be postponed until after January 1. If you're self-employed, time your billings to ensure that you won't receive payment until the New Year. The benefit: You won't be taxed on the income until the year after you receive the payment. Keep in mind, however, that this strategy will pay off only if you're not in a higher tax bracket in the year you receive payment. If you have questions, consult your tax advisor for guidance and information.
Beat the "2 percent floor."
Some expenses are deductible only if they exceed 2 percent of your Adjusted Gross Income (AGI)-but others carry no such stipulation. For instance, you may be able to claim all or part of the interest you pay on student loans, as well as alimony payments. You may also be able to claim moving expenses if you relocate to a new job at least 50 miles farther from your home than your current job.
Deduct your premiums.
If you pay any part of your employer-sponsored healthcare premiums with after-tax money, you can deduct the cost in excess of 10% of your adjusted gross income (7.5% if you're 65 or older). If you're self-employed and not eligible to be covered by a spouse's employer-sponsored health plan, the 10% threshold is waived.
If you have a state or property tax bill, mortgage payment or medical bill due in January, it may make sense to write and mail the check before the Times Square ball drops on New Year's Eve. By doing so, you may be able to take a current-year deduction-but verify this first with your accountant or tax advisor.
Don't give only cash to charity.
We're not suggesting that you stifle your generosity-but there are more tax-advantaged ways to express it. By giving appreciated shares, bonds, mutual funds or property that you've owned for at least one year, you can deduct their current market value as well as avoid paying capital gains tax.
Set up a custodial account.
A CIT Bank custodial account lets you save money and manage it for a minor under the age of 21. All CIT Bank savings and CD accounts can be set up as custodial accounts. A custodial account can be used to fund a child's education, among other things to benefit the child, and some of the earnings on the money may be exempt from federal income tax.
Nail those hidden deductions.
There is a wide range of deductions that often escape the notice of even the most tax-savvy individuals. Depending on your adjusted gross income and other circumstances, the following are examples of expenses that may be partially or fully deductible:
Not just smart, but tax-smart.
While taxes are inevitable, you can influence the amount of tax you'll have to pay. Above are a few examples of some tax-saving opportunities. For specific guidance and information, please consult your tax advisor. But don't wait until the end of the year to get organized. Early planning is key.
This information is made available to you as a self-help tool for your independent use and is not intended to provide investment advice. We cannot and do not guarantee its accuracy and applicability to your individual circumstances. All examples are hypothetical and are for illustrative purposes. Please consult with a financial advisor for a solution suitable for your needs.
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