End of the Year Tax Saving Strategies and Tax Updates

FYI: There were a lot of changes and expired tax breaks in 2013 and 2014. Some of them may be reinstated. Please visit our website periodically for new tax changes or sign up for our newsletter to receive last minute updates.

Personal Tax

There are multiple tax changes due to inflation; mainly tax brackets, personal exemption, and standard deduction. In addition, there are increases in the Earn Income Tax Credit. Put money into a retirement account. The general deadline is April 15. For some accounts, the deadline is December 31 and this matter should be discussed with your employer or your broker.

In addition to saving on taxes, you may qualify for an additional "Saver's Credit", which could give you additional money for your retirement account. More information can be found through this IRS link. In addition you may contribute to Health Saving Account HSA or similar plans.

Review your portfolio and if you need to recognize some losses, sell your investments before the end of the year. Make another mortgage payment or make estimated state tax payment before the end of the year. More information on these tax moves as well as others are found in Kiplinger.

Maximize your charity year end donation. You need to have receipt for any "in kind donation" and for any donations over $250.00. More information on this matter can be found at this IRS link. Remember the charitable mileage rate, which is 14 cents per mile.

Work related expenses such as protective clothing, tools, education, books, laundry or anything job related which you need to pay by yourself, should be paid for before end of the year (subject to limits).

Payoff outstanding medical bills and prepay medical procedures (down payment) to maximize on medical deduction. You need to have medical expenses of over 10% of your adjusted gross income (the rough total of your earnings) in order to be able to deduct them. Anything over 10% is deductible. Remember about the medical mileage rate, which is 23.5 cents per mile.

Consider putting money in "Bright Start", "College Illinois" or "Bright Directions" Illinois educational accounts, which lower state income tax liability and earnings that are also tax exempt (when you apply them for educational expenses). Estimated tax savings are 5% of the contributions. As for federal taxes, you may consider to prepay your spring semester. Please note that the reverse is also true although it depends on the circumstance; you may delay selling investments, paying off your medical bill, making mortgage payments, and other deductions.

Business Tax

Two main categories are retirement and deprecation. Many other deductions expired last year. Again, put money into a retirement account. The general deadline is April 15 and for some accounts the deadline is December 31 which should be discussed with your broker. Again, in addition to saving on taxes, you may qualify on personal tax returns for additional "Saver's Credit", which could give you additional money for your retirement account. Additional information is available at this IRS link. In addition you may contribute to Health Saving Account HSA or similar plans.

You may also consider buying new or used equipment or a car. Accelerated deduction is $25,000.00, plus regular deprecation. Those deductions may save you a lot on taxes. Please remember, there are different rules for cars; deductions are less generous, unless you buy a truck or SUV which has a gross vehicle weight over 6,000 pounds. You need to remember that purchasing a vehicle or equipment needs to be business-driven not tax-driven. This means you should have a need for it in the business.

For some specific business changes the meal rate for truckers (over the road DOT) is $59.00 a day. The business mileage rate is 56 cents per mile.

Happy tax savings.