Tax Tips for End of the Year

It is that time again, the end of the year is approaching and then it is tax time, but why wait to think about taxes in January, when there is still time this year for some last minute adjustments. By using last year’s tax return as a starting point, you can evaluate and make changes that could positively change your taxes for 2014. The following at steps and planning strategies to consider when review finances at the end of the year.

  • Double Check Withholdings: You do not want to pay the IRS anymore that you have to. Adjust your withholdings so just enough comes out and you break even. If you can live without the extra pay coming in, put it in a savings account or add it to you retirement account.
  • Refinance Debt: Lowering your mortgage interest rate, not only give you a lower interest rate and payment, but if you use any of the proceeds to make physical improvements to your home, the amount could be subjected to alternative minimum tax (AMT).
  • Prepay Taxes: If you are not subject to ATM, consider prepaying estimated quarterly state taxes and property taxes. If you are able to prepay, the deductions can be taken for the 2013 return if paid before December 31.
  • Avoid ATM: If you live in a high tax state, have a duel income, and have children you might want to look at your chances of paying the alternative minimum tax. To avoid paying this tax, you should talk to you tax professional, but also consider deferring payments of state and local taxes until the new year, and accelerate you income to the point where you are no longer subjected to the tax. In many situations, this is a multiyear planning, so now is a good time to start.
  • Check up on Portfolios: Harvest any losses to help offset capital gains, rebalance any tax-deferred retirement accounts by allocating funds for the accounts, and consider your cash flow.

It is important to act before the end of the year if you are wanting the deductions for January taxes, then now is the time to act. Anything paid on or after January 1 will be on next year’s taxes.


Post DOMA Wealth Management Tips

There have been many changes now that the Supreme Court overturned the Defense of Marriage Act (DOMA). Some of the changes include how same-sex couples are able to manage their wealth in regards to their partner. Couples will need to think about changing or review many aspects to their financial wealth. The following are point to consider reviewing to get a fresh look at how the law changed same-sex couples’ financial plans.

  • Revisit your Financial Plan. Having your marriage recognized by the government is a big deal. There are many points to you financial plan that will need to be reviewed.
  • Update Estate Plans. The biggest benefit of having your marriage recognized by the federal government is there is no penalty of estate tax. Since the estate will be given over to a spouse, there is not estate tax to take 40% of the estate from them. It also give spouses a change to establish trusts, wills, general power of attorney and healthcare powers.
  • Beneficiary Designations for Retirement Accounts. Now that the same rules apply, same-sex couples can revisit beneficiary designations. The survivorship rules apply to IRAs and other qualified retirement plans.
  • Investment Portfolios. Are there any adjustments to investment that need to be made so you are truly investing together? Think about updating account titles or reorganizing the portfolio in a manner that would be more beneficial to both partners.
  • Tax Planning. The ability to file jointly is now a massive win. While you may choose not to change anything, it is worth a look. It may be in your best interest to file jointly and save you hundreds in taxes not paid. You may even want to look at amending the past three year’s taxes to see if filing jointly would be a benefit.
  • Health Insurance Benefits. An overhaul to the family health insurance plan is in order. If you are not already provided with spousal health insurance, it may be cheap to switch.
  • Taxable Estate and Social Security. If your spouse had died in the last three year, amend the estate tax return and have the taxes refunded. There is three years to be able to do this, so act soon. Also married couples are eligible for 50% of spousal Social Security benefits of the spouse’s full retirement age. If it is bigger switch to spousal benefits.
  • Consider the Whole Family. Since estate planning extends to children for most mixed gender couple, it should also extend to children for same-sex couples. Make sure the estate plan also defines the word spouse.
  • PreNuptials. It is important to protect you assets before entering into a marriage. Since the laws apply to everyone, any laws dissolving a marriage also applies.