Now that the final quarter of the year is under way, it is an ideal time to focus on year-end tax planning to minimize taxes for this year and be better positioned for next year’s taxes. The government’s shutdown may not have a direct impact on planning, but inflation adjustments, expiring provisions, and other factors will affect tax planning at this time.
Overview
As a general rule, year-end planning is a multi-year exercise, taking into account current tax rules, rules for next year, and the taxpayer’s income and expenses now and anticipated for the future. For individuals, projections for cost of living adjustments (COLAs) to dozens of tax rules for 2014 are modest. For example, the personal exemption likely will rise only $50. Similarly small increases are projected for tax brackets, the standard deduction, the alternative minimum tax exemption, and income thresholds for Roth IRA contributions. Official COLAs may not be released until later in the year, but this should not dramatically change from projections; thus they can be used for planning purposes.
