Planning for Your Future Doesn't Get a Vacation

Author: Keith Huggett

The weather's warm, the lake is calling...but wait! So is your tax bill.  Summertime is the perfect time to revisit your tax plan.  I know it's not quite as much fun as throwing out your fishing line and bringing in the perfect trout, but it is a necessary evil.  Here are some tips that may help you benefit in the end:

1. Look at your retirement plan.

• Elective contributions – the ones you ask your employer to withhold from your paycheck – these lower your current-year taxable income. 
• Compare the amount you’re currently depositing in your account to the maximum allowed, and make adjustments to spread the impact over the rest of the year.
• ​The maximum 401(k) contribution for 2014 is $17,500. 
• If you’re 50 or older this year, add an additional $5,500.

•  If you are currently setting aside money to pay for your child's college expenses in a taxable account, you could open a 529 plan instead.

• Broaden your tax-planning focus to include family members. 
  ​For instance, say your parents or children are in a lower tax bracket than you are. Employing them in your sole proprietorship can provide net tax savings.

•  Recordkeeping is essential. 
  • ​Examples of tax breaks that may be disallowed if you cannot provide proof include: charitable contributions, gambling losses, vehicle costs, and travel and entertainment expenses. 
• ​If you neglected to start tracking these expenses at the beginning of the year, get going now.
• Using your smartphone to assist you with recordkeeping is a simple trick. There are many apps out there that can help you keep track of mileage and receipts, just to name a few.

• Keep your college student qualified as your dependent by monitoring the “support” test. 
  • The rule: Generally, your child cannot provide over one-half of his or her own support during the year.
  • Other relatives may qualify as your dependents, including parents in nursing homes.

These are just a few tips that can assist you with your mid-year tax planning.  There are still many other options available to you that may reduce your year-end tax bill.  If you have questions regarding tax planning, as always the Specialists at The Tax Office, Inc., suggest you speak to a professional. We are here to help you in any way that we can. Please, contact us with your questions. Our goal is to help you grow your business.