End-of-the-Year
Money Moves
Here
are some things you might want to do before saying goodbye to 2013.
Provided by Jared Daniel of Wealth Guardian Group
What has changed for you in 2013? Did you start a new job – or leave a job behind? Did
you retire? Did you start a family? If some notable changes occurred in your
personal or professional life, then you will want to review your finances
before this year ends and the next one begins.
Even if your 2013 has been relatively uneventful, the end of the year
is still a good time to get cracking and see where you can plan to save some
taxes and/or build a little more wealth.
Do you practice tax loss harvesting? That is the art of taking capital losses (selling
securities worth less than what you first paid for them) to offset your
short-term capital gains. If you fall into one of the upper tax brackets, you
might want to consider this move, which directly lowers your taxable income. It
should be made with the guidance of a financial professional you
trust.1
In fact, you could even take it a step further. Consider that up to
$3,000 of capital losses in excess of capital gains can be deducted from
ordinary income, and any remaining capital losses above that can be carried
forward to offset capital gains in upcoming years.1
Do you itemize deductions? If you do, great. Now would be a good time to get the
receipts and assorted paperwork together. Besides a possible mortgage interest
deduction, you might be able to take a state sales tax deduction, a
student-loan interest deduction, a military-related deduction, a deduction for
the amount of estate tax paid on inherited IRA assets, an energy-saving
deduction, a homebuyer credit … there are so many deductions you can potentially
claim, and now is the time to meet with your tax professional so that you can
strategize to claim as many as you can.
Could you ramp up 401(k) or 403(b)
contributions? If you can do this in
November and December, that will lower your taxable income for 2013. Do it
enough and you might be able to qualify for other tax credits or breaks
available to those under certain income limits.
Are you thinking of gifting? How about making a contribution to a charity or some
other kind of 501(c)(3) non-profit organization before 2013 ends? In many
cases, these gifts are partly tax-deductible. If you pour some money into a 529
plan on behalf of a child, you could get a deduction at the state level
(depending on the state).
Of course, you can also reduce the value of your taxable estate with a
gift or two. This year, the gift tax exclusion is $14,000. So you can gift up
to $14,000 to as many people as you wish this year, with the understanding that
you have a $5.25 million lifetime limit before you are actually hit with gift
taxes. This $5.25 million limit will rise in future years as it is
inflation-indexed.2
While we’re on the topic of estate planning, why not take a moment to
review the beneficiary designations for your IRA, your life insurance policy,
and your retirement plan at
work? If you haven’t reviewed them for a decade or more (which isn’t uncommon),
double-check to see that these assets will go where you want them to go should
you pass away. Lastly, take a look at your will to see that it remains valid
and up to date.
Should you convert all or part of a traditional
IRA into a Roth IRA? You will be
withdrawing money from that traditional IRA someday ... and those withdrawals
will equal taxable income. Withdrawals from a Roth IRA you own are never taxed
during your lifetime, assuming you follow the rules. Translation: tax savings
tomorrow. Before you go Roth, you do need to make sure you have the money to
pay taxes on the conversion amount. If you do this and change your mind, the
IRS gives you until October 15 of the year after a conversion to undo it.3
Can you take advantage of the American
Opportunity Tax Credit? Now in place
through 2017, the AOTC for qualified college expenses allows individuals whose
modified adjusted gross income is $80,000 or less (and joint filers with MAGI
of $160,000 or less) a chance to claim a credit of up to $2,500 for qualified
tuition and related expenses. Phase-outs kick in above those MAGI levels.3,4
What can you do before they sing “Auld
Lang Syne”? Talk with a financial or
tax professional now rather than in February or March. Little year-end moves
might help you improve your short-term and long-term financial situation.
Jared Daniel may be reached
at 480-987-9951 or jared.daniel@wealthguardiangroup.com.
This material was prepared by MarketingLibrary.Net Inc., and does
not necessarily represent the views of the presenting party, nor their
affiliates. All information is believed to be from reliable sources; however we
make no representation as to its completeness or accuracy. Please note -
investing involves risk, and past performance is no guarantee of future
results. The publisher is not engaged in rendering legal, accounting or other
professional services. If assistance is needed, the reader is advised to engage
the services of a competent professional. This information should not be
construed as investment, tax or legal advice and may not be relied on for the
purpose of avoiding any Federal tax penalty. This is neither a solicitation nor
recommendation to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. All indices are unmanaged and
are not illustrative of any particular investment.
Citations.
1 - bankrate.com/finance/money-guides/capital-losses-can-help-cut-your-tax-bill-1.aspx
[9/19/13]
2 - chron.com/news/article/New-act-clears-up-estate-gift-tax-confusion-4301217.php
[2/22/13]
3 - tinyurl.com/lcb66o8 [12/28/12]
4 - irs.gov/uac/American-Opportunity-Tax-Credit
[5/31/13]
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