5 Tax Tips for Year-End Planning

Barry was recently interviewed by Carmen Wong Ulrich, host of Marketplace Money about year-end tax planning tips which aired on NPR radio on December 23, 2013.

Listen to Barry’s 5 Tax Tips for Year-End Planning here.

(The following article by Carmen Wong Ulrich appeared on Marketplace Money, December 27, 2013)

Along with New Year resolutions and gift returns, here’s another holiday rite of passage: End-of-year tax planning.

We’re a few months away from the filing deadline, but what you do now can make a big difference on your tax bill. Barry Glassman, certified financial planner, joins us to discuss what tax moves you should make now.

“For the first time in a long time, we know what’s likely to be the tax brackets and rules for next year,” says Glassman. The past couple years there have been rules expring and tax brackets expiring and all kinds of different things. This year is kind of easier, due to less congressional noise.”

Charitable Donations

1. 25 percent of all charitable donations occur during the winter holidays. That means you still have time to get that deduction! And here’s one quick tip, consider donating stock in lieu of money: “Tax payers need to know there’s an advantage to donating appreciated securities,” says Glassman. “Let’s say you bought a stock or mutual fund during the downturn, and it’s appreciated substantially. If you sold today you’d realize a capital gain [and be subject to taxes on those gains], but if you donate that sock or mutual fund, you get the full market value of the donation, and the charity gets to sell it and not pay the tax.”

Retirement Account Contributions

According to Glassman, there are two things people should look at outside of the basic tips like maxing out your IRA:

2. “For everyone turning 50 next year, they should consider the fact they can contribute a bit more with catch-up contributions. For those people who are mature enough to handle the extra $5,500 of contributions, they can go ahead and put that in place,” Glassman says. Make sure you speak with someone to maximize contributions. Some assume deductions will automatically max-out if that’s the option they chose when they first signed up for their retirement plan.

3.  If you are self-employed and own a SEP, you might want to switch an individual-K. Basically, it’s a personal 401k plan for people that are self-employed.  IndividualK.com is a great resource to calculate how much you should be contributing.

Taxes

4. Take a look at your portfolio and re-assess stocks that lost value. According to Glassman, “It makes sense to sell [losing stocks] before year-end. Those losses can help offset the capital gains that were realized, even [if they occured] earlier in the year.”

5. Glassman suggests using tax preparation software like TurboTax for basic returns, but turning to a tax professional if you need more guidance or might be moving to a new tax bracket next year. A tax professional can walk you through potential savings on retirement accounts and suggest other ideas that can add up in the long-run.