If you anticipate a substantial increase in taxable income, we may want to explore deferring deductions into 2015 by looking at the following:
- Postponing year-end charitable contributions, property tax payments, and medical and dental expense payments, to the extent you might get a deduction for such payments, until next year; and
- Postponing the sale of any loss-generating property.
Accelerating Deductions into 2014
If you expect your income to decrease next year, we can accelerate deductions into the current year to offset the higher income this year. Some options include:
- Consider prepaying your property taxes in December;
- Consider making your January mortgage payment in December;
- If you owe state income taxes, consider making up any shortfall in December rather than waiting until your return is due;
- Since medical expenses are deductible only to the extent they exceed 10 percent
(7.5 percent if you or your spouse are 65 before the end of the year) of your adjusted gross income (AGI), if you have large medical bills not covered by insurance, bunching them into one year may help overcome this threshold;
- Making any large charitable contributions in 2014, rather than 2015;
- Selling some or all of your loss stocks; and
- If you qualify for a health savings account, consider setting one up and making the maximum contribution allowable.
- Certain life events can also affect your tax situation. If you’ve gotten married or divorced, had a birth or death in the family, lost or changed jobs, retired during the year, we need to discuss the tax implications of these events.