As you’re plunking bait, lolling on the beach, or paddling a stream, let your thoughts turn to… taxes. Sure, it’s a lot easier not to think about taxes until you have to, but by then it’s usually too late to do anything that might make a difference. Late summer, when your blood pressure is nice and low, is the perfect time to decide whether you need to take any steps to prepare for this year’s taxes. Consider Forbes’ assessment of top tax brackets for 2014 before you stop reading:
Single taxpayers earning:
· Over $36,900 up to $89,350 may owe $5,081.25 plus 25 percent of the excess over $36,900
· Over $89,350 up to $186,350 may owe $18,193.75 plus 28 percent of the excess over $89,350
· Over $186,350 up to $405,100 may owe $45,353.75 plus 33 percent of the excess over $186,350
· Over $405,100 up to $406,750 may owe $117,541.25 plus 35 percent of the excess over $405,100
· Over $406,750 may owe $118,118.75 plus 39.6 percent of the excess over $406,750
Married taxpayers filing jointly and earning:
· Over $73,800 up to $148,850 may owe $10,162.50 plus 25 percent of the excess over $73,800
· Over $148,850 up to $226,850 may owe $28,925 plus 28 percent of the excess over $148,850
· Over $226,850 up to $405,100 may owe $50,765 plus 33 percent of the excess over $226,850
· Over $405,100 up to $457,600 may owe $109,587.50 plus 35 percent of the excess over $405,100
· Over $457,600 may owe $127,962.5 plus 39.6 percent of the excess over $457,600
Apologies if your blood pressure just jumped higher. Take a deep breath and decide whether these tips, offered by The Fiscal Times, can help.
1. Manage your taxable income effectively. It may be possible to reduce your taxable income by deferring it, making contributions to pre-tax investments (like retirement accounts), and making gifts of income producing investments or cash to family members.
2. Generate investment losses. Selling depreciated assets can help generate losses and losses may offset capital gains.
3. Accelerate income if you are subject to the alternative minimum tax (AMT). Forbes offered additional insight to this suggestion. “While a taxpayer’s regular taxable income is subject to graduated rates with a low of 10 percent and a high of 39.6 percent, AMT income is taxed at a flat 28 percent rate… And where I come from, 28 percent is less than 39.6 percent. And it’s this variance that gives rise to an often-overlooked planning opportunity.”
None of the above is intended as tax advice. It’s food for thought. Before you do anything, talk with a tax professional about your financial situation.
Think About It
“A closed mouth catches no flies.”
--Miguel de Cervantes, Spanish novelist