With another year winding down, we have a lot on our minds. Beginning to plan for your income taxes now will help alleviate some of the stress at the end of the year.
In 2014, we saw a number of tax law changes go into effect that may impact your personal income tax liability. Various phase-outs for itemized deductions and personal exemptions have increased effective marginal rates for individuals with adjusted gross income (AGI) of $250,000 or more ($300,000 for married couples). Another new law increases the rate on taxable income over $400,000 ($450,000 for married couples) to 39.6 percent.
Other changes to take note of are provisions under the Affordable Care Act. Beginning in 2014, individuals with AGI over $200,000 ($250,000 for married couples) will be subject to a 3.8 percent surtax on investment income. Additionally, the IRS will begin to penalize taxpayers without health insurance.
There are a few ways to minimize the effects of these changes on your personal income tax liability. For example, it is important to keep an eye on your investment income. Investments that generate a lot of taxes are best kept in your 401(k) or other tax deferred accounts. This may also be a good time to max out your contributions to your tax-deferred retirement plan, as this will lower both your taxable income and adjusted growth income. The current contribution limits are $17,500 if you are under 50 and $23,000 for anyone over 50. There is good news for those who own their own agriculture business. If you have a SEP-IRA, you are able to contribute up to 20 percent of your net self-employment income, up to the maximum of $52,000.
These tips pertain to individual taxes, however there are plenty of ways that businesses can prepare as well. Next month, I will discuss year-end tax planning tips for agriculture businesses.
CREDITS
column by STEVEN E. CRISMAN
BIO: Steven Crisman is the managing partner of Cross, Fernandez & Riley, LLP’s (C/F/R) Winter Haven office and leads their Agriculture Practice Group. He primarily serves the agriculture, manufacturing, warehousing, and distribution industries. He has specific experience with citrus growers, cattle ranchers, citrus and other horticultural nurseries, citrus harvesters and other support industries as well as watermelon, blueberry and other growers. In addition, Steve provides comprehensive tax and estate planning, attestation and business succession planning services.
