With only _______ shopping days before Christmas and you want me to read a blog post about tax planning? Sounds crazy, but not everyone celebrates Christmas, almost everyone pays taxes. You could be glad in April because tax planning now could generate a tax refund. (You could even pay for next year’s Christmas presents.)
Get out your lasts year’s tax return and see if this year’s income will be higher than last year. Will you be in a higher tax bracket? If yes, an extra contribution to your tax deductible retirement account could generate a bigger tax saving.
Add up your medical bills from this year and compare them to last year. If you have spent less, you may want to reschedule your dentist appointment from early January to December. Why wait until next year if you need new eyeglasses, buy them now. Planning a winter vacation that requires medical shots, get them now.
Add up your charitable donations and compare them to last year. If you have donated less or nothing at all, now would be a good time to be generous. Wealthy people donate stocks, ETFs and mutual funds that have a capital gain instead of money. They don’t have to pay any tax on the gain and they get a bigger tax deduction.
Have you sold any investments in 2014 that will generate a capital gain? Consider doing some tax loss selling of investments that are underwater to offset the capital gains. A capital gain loss can be carried back 3 taxation years to offset capital gains incurred in that year. You can always buy them back later. (You will have to wait 31 days to re-buy to avoid “superficial loss rules”)
Postpone selling your investment winners in non-registered accounts until Jan to avoid paying tax in April.
Look for ways to legally split income by transferring income producing assets to family members that are in a lower tax bracket.
Getting a big year-end bonus? It may be better to postpone getting it to January or have your employer deposit the bonus directly into your retirement account!
Check to see if there are any changes to tax laws that could affect your tax return for 2014 & 2015. There could be some new tax deductions or some loss deductions.( in Canada, a safe deposit box is no longer tax-deductible)
The tax man is happy to pick your pockets for more money. It is up to you to legally avoid paying them too much. Remember, rich people stay wealthy because they can afford the best tax specialist to reduce the amount of tax that they pay.