Welcome, Bienvenidos. This column is dedicated to providing you insight into financial matters. What better way to start than with tips you may implement before the end of the year. Here are some frequent questions I receive.
How does saving for retirement save on taxes? I will cover this in more detail in a future column, but know that if you are able to make the maximum contribution to an Individual Retirement Account (IRA) and do so, you can deduct the entire amount now from your gross income on your tax returns and thus potentially reduce your current taxes. You may also set up an IRA for your spouse and contribute to it, even if they did not earn income during the year. For 2014 you may contribute up to $5,500 to your traditional IRA and if you are over age 50, you may make a “catch-up” contribution of $1,000.
My wife and I own our own business. What are some things we should try to do before the end of the year? Try to defer income into next year by delaying billing and paying any bonuses. You may try to pay as many expenses as possible before the end of the year and perhaps even pre-pay some expenses. As employees of the business, determine what business related expenses can be deducted from your personal taxes.
A few other tips:
Make charitable donations before the end of the year.
Pay your January house payment in December, in order to deduct a full year of interest.
Get your medical visits and costs in before the end of the year.
If you take care of family and pay for over half of the expenses of a parent or other relative, you may be entitled to claim a dependency exemption.
You can claim your children as dependents up to age 24 if they’re a full-time student and don’t earn more than $3,950 for 2014.
This article is meant to be general in nature and should not be construed as financial advice related to your personal situation. Waddell & Reed does not provide legal or tax advice. Please consult a professional prior to making financial decisions.
Kim Fernández is a Financial Advisor with Waddell & Reed and can be reached at 520.745.3090 x116 or email kfernandez@wradvisors.com for assistance. Waddell & Reed, Inc. Member SIPC
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