Willis Report: Things to do right now to save on taxes next year

Willis Report: Things to do right now to save on taxes next year

Posted: Updated:

If you're smart about your money, you've probably already started thinking about what you can do before the year ends to reduce your tax bill. There are lots of changes awaiting taxpayers on April 15 thanks to the Affordable Care Act and the American Taxpayer Relief Act of 2012 -- not much of it good.

First things first: If you have a large portfolio or earnings above $200,000, now is the time to run a simulation of what your taxes may look like for next year. That way, you can at least get a sense of what you'll be on the hook for come April 15, 2014.

Next, if you're expecting a bonus or year-end income that will push you into a higher bracket, consider deferring that money into next year. Hold off selling assets that will produce a capital gain.

If you're self-employed, don't send out invoices for year-end jobs until early next year. Keep in mind, high earners are facing a new top tax bracket of 39.6 percent on taxable income of $400,000 for single earners and $450,000 for married couples.

Even if you aren't in the top tax bracket, it makes sense to salt more money into your 401(k). That will reduce your income reported to the IRS since most plan contributions are made before taxes are taken out. Remember if you are 50 or older, you can put in an extra $5,500 over the $17,500 limit.

Now is also a good time to review the limits on your flexible spending accounts. Under Obamacare, the limit on the amount you can set aside pretax was set at $2,500. (Before the ACA, there was no statutory limit on contributions.) Some companies allow a grace period to use untouched FSA funds, but not all. Plus, the Treasury recently announced changes to the use-it-or-lose-it rule. Now, account holders can carry over up to $500 in excess money into the next benefit year, as long as your company adopts that plan.

Also important to consider: The chances of mutual funds passing on long-term capital gains distributions are high. Fund companies release estimates of distributions this month. If you're planning on selling a fund, do it before distributions.

Now is also the time of year to consider charitable contributions. Make sure your contributions go to an eligible 501(c)(3) organization so that you can take the deduction.

Interact with Gerri on Twitter @GerriWillisFBN and Facebook for more information, or to voice your concerns and questions.

  • Good Day ArchiveMore>>

  • Get educated with online classes

    Get educated with online classes

    Friday, September 12 2014 11:17 AM EDT2014-09-12 15:17:09 GMT
    Ever wanted to take classes but thought you didn't have the time or or you couldn't afford it? Well with more and more online options out there, you do and you can. And many of them are free.
    Ever wanted to take classes but thought you didn't have the time or or you couldn't afford it? Well with more and more online options out there, you do and you can. And many of them are free.
  • Celebrate Oktoberfest in Helen GA

    Celebrate Oktoberfest in Helen GA

    Friday, September 12 2014 10:18 AM EDT2014-09-12 14:18:31 GMT
    It's the annual celebration of beer, brats, and bands.  And, everything else having to do with German culture, of course!
    It's the annual celebration of beer, brats, and bands. And, everything else having to do with German culture, of course! The 44th Annual Oktoberfest launches with a parade Saturday, and continues at Helen Festhalle for the next several weeks.
  • Pike Nurseries: Fall table decor

    Pike Nurseries: Fall table decor

    Friday, September 12 2014 9:29 AM EDT2014-09-12 13:29:31 GMT
    Here are some easy (and elegant!) ways to use fall flowers, vegetables, herbs and accessories to create a look for the table that easily transitions for the upcoming Halloween and even Thanksgiving holidays!
    Here are some easy (and elegant!) ways to use fall flowers, vegetables, herbs and accessories to create a look for the table that easily transitions for the upcoming Halloween and even Thanksgiving holidays!
Powered by WorldNow
Didn't find what you were looking for?
All content © Copyright 2000 - 2014 Fox Television Stations, Inc. and Worldnow. All Rights Reserved.
Privacy Policy | New Terms of Service What's new | Ad Choices