The end of the year is the perfect time to align your US expat tax strategies.
It's that time again, as we close out another year, to review some end of the year tax hacks that can still be used to save you money. As you may already know, many of the tax strategies you employ must be done in the same tax year as they will be claimed.
Offset gains with losses. Look at your portfolio and see if you have gains and losses. If you have both, you can write off the gains against the losses. If you have more losses than gains, you can also take up to $3,000 of losses against ordinary income. To take a loss for 2014, you must claim the loss by selling the asset or investment that contains the loss this year. You can also take additional losses and "carry them forward" to next year.
Fund your individual retirement accounts, Roth IRAs, 401K, IRA, etc. Most retirement plans require you fund that investment in the year you take the write-off, but not all. With respect to IRAs and Roth IRAs, you can wait until tax filing time, plus extensions.
Employer plans do require you to contribute into the plan (employee contributions), however, during that tax year. So, if you have not fully funded your company retirement plan, get on the ball and talk to your human resources department to see how you can put more money in by year end. Remember, you can add $17,500 to your 401K, and an additional $5,500 if you are over age 50.
Also, the rules are changing for 2015, so you should change your contribution amount accordingly. IRA and Roth IRA contributions remain the same at $5,500 and $1,000 catch-up for those over age 50. The 401K contribution limits increase to $18,000 and a $6,000 catch-up for those over age 50. If you are having funds automatically invested into your retirement plans, update those automatic investments to match the new limits.
Bless the people. Be a giver. Give $14,000 to anyone you like. The annual gift amount you can give to someone without having to fill out a gift tax return is $14,000, but you must complete the gift (give it to the person, entity or charity) by the end of the year.
Some individuals might say, "Why on earth would I want to give that kind of money to anyone?" But the reality is, some people have more than enough assets in their portfolios that they want to give away early (before they die so the kids or charities get the benefit now). But there is still a limit per year with respect to how much you can actually gift to someone. Again, that amount is $14,000 for 2014. If you are married, you and your spouse can both gift $14,000, making your total contribution $28,000 per person.
Accelerate your expenses. If you are a business owner or self-employed, you can deduct and pay expenses now versus in 2015. This will lower your 2014 income, and thus your tax owed as well. Some of the expenses you may consider paying early are interest, rent, medical insurance premiums, vendor expenses, etc.
Pay your January mortgage in December. If you pay your January mortgage payment early, you are essentially paying the January interest in December, which will allow you to write it off now, versus a year from now. This may not help you significantly, but every little bit counts.
Not all of these things will apply to everyone. As a matter of fact, only a few of these strategies may apply in your personal circumstance. The question you need to answer is, "Which ones apply to me?" So read over this list carefully, and figure out which strategies will give you the best benefits for your 2014 taxes. Then implement those strategies.
If all of this information seems overwhelming, as it does for a lot of people, then work with someone who can help you. This could be your Bright!Tax CPA, investment or financial adviser. But whatever you do, make sure you do the planning. It may actually save you some serious money.