Six Tax Moves To Make Before Year End
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Six Tax Moves To Make Before Year End

It’s time for the end-of-the-year lists, the best of, worst of and the ever-favorite “things to do by the end of the year”. This is one of those to do lists, but it comes with rewards you can realize throughout 2015 and, if you share it, you can even cross “good deed” off your list. 


1) Get organized.

For many, this can be the most challenging of all – but it makes everything easier in the long run. Why are you doing this? Because for most of these tasks, you need to know what happened in 2014, not what happened up to 11:59 on April 14, 2015.

Key documents:

1099s or W2 forms
Brokerage statements
Receipts – if you itemize

Having all of your accounts in one place is a good start – Personal Capital is designed to make this part easy.

2) Adjust your withholding.

New job? New kid? Refinanced your mortgage? Adjusting your tax withholding now sets you up for a tax-efficient 2015.

Many companies have a self-serve site for doing this, and HR departments can help. Figure out your withholding with the help of a financial advisor from Personal Capital or elsewhere, or this IRS worksheet.

3) Max out the retirement accounts.

It’s the single best way to reduce your taxes and help yourself in the future. An individual in the 25% tax bracket in 2014 would save $4,375 in federal taxes by maxing out their 401k contributions.

$17,500 ($1,458/month) for 401k, 403(b), and Thrift Savings Plans. The maximum 401k contribution goes up to $18,000 in 2015.
$5,500 for IRAs ($6,500 for those 50 and over). Note that IRA investors do have until April 15.

Can you do both? Depends on how much you make. Read this quick discussion for more information.

While you’re at it, make sure you aren’t overpaying for the funds you have in your retirement accounts. The Personal Capital 401k Fee Analyzer makes it easy to see where you are paying someone else instead of yourself.

70 ½ or older? Don’t forget to take your required minimum distributions (RMD). You technically have until April 15, 2015, but still must take your next RMD by Dec. 31, 2015, depending on whether or not you want more income (and therefore tax) next year.

4) Lessen your gains in order to gain from your losses

If you have investments that didn’t perform well, now may be the time to sell them in order to reduce your investment taxes. Depending on your ideal allocation, you can buy a similar security with the proceeds or use them to reposition your portfolio. While no limit exists on the amount of capital losses that can be applied to capital gains each tax year, just $3,000 of such losses can be applied against regular income annually (the balance can be carried over to next year). Tax loss harvesting is a key part of managing your income and your wealth. Tax loss harvesting must be performed by December 31.

Be aware of The Wash Sale Rule. You must wait at least 30 days after the sale date before reinvesting the proceeds into the same security to claim a loss under the IRS’s wash-sale rule. The security must also have been held for at least 30 days after its purchase before being sold at a loss.Watch out 2: Timing. It’s generally a better tax move to hold securities for a year and a day in order to avoid being taxed at a higher rates.

For example: if an individual purchased stock on December 30, 2013 and sold it on December 30, 2014, the maximum potential capital gains tax rate would be 43.3%. If she waited one more day, the rate would be 20%.

If you have a financial advisor, this is something you should discuss with her or him.

5) Spend for your health

Do you have a Flexible Spending Account (FSA)? If so, your pre-tax dollars expire – so schedule those appointments (another to-do, sorry!) and buy those reading glasses. Insurance co-pays, vision exams and flu shots may not be the most fun way to celebrate the season, but you already paid for them.

Do you have a Health Savings Account (HSA)? Those funds can roll over and continue to grow. Log in to your FSA account and find out how much you have to spend.

6) Donate

You must give before December 31, 2014 in order to qualify for a tax deduction. Keep in mind that write-offs are limited to 30% of your adjusted gross income (AGI).

Keep a receipt for any donations – used to be just those over $250, but times have changed. If you assign greater than a $500 value to donations in DIY tax software such as TurboTax or H&R Block, you will be asked to fill out another form with the itemized deductions and when the items were procured.

Securities held longer than a year that are donated to charitable organizations will incur no capital gains taxes when eventually sold. This is a double tax benefit as you get full credit at current market value and get a tax deduction as well. Noncash donated assets, like property or vehicles, valued over $5,000 will most likely require a professional appraisal from the IRS.

You can gift up to $14,000 to an unlimited number of individuals while avoiding federal gift taxes in 2014. Stock gifts are valued at the market value of the security the day it’s gifted. Just be aware that the gifts you make now affect your basic exclusion of $5.34 million per individual starting in 2015, from $5.25 million in 2014.

Related: Your Guide To Making Charitable Giving Personal


Taxes consistently rank as one of the largest reoccurring expense items everyone must pay. At the very least, try and save more of your money than the government takes away. In other words, if your effective tax rate is 25%, shoot to save at least 26% by making smart tax moves. Tax savings add up over time!

Manage your money for free with Personal Capital today

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

We at Personal Capital have one goal in mind: to build a better money management experience for consumers. That’s why we’re blending cutting edge technology with objective financial advice. We believe this is the best way to empower individuals and their money. Subscribe to our blog and join our empowered financial community.
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This year, my top financial priority is:

Building my emergency fund
Paying off high-interest debt
Budgeting better
Saving for a short-term goal, like a vacation or new car
Increasing my investment contributions
Maintaining status quo - I’ve got this under control

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