Act Now to Lower Your 2014 Taxes / Many Tax-Saving Strategies Require Action by Year-End

Laura Saunders for the Wall St Journal writes: If you want to lower your 2014 income taxes, you need to act now to limit Uncle Sam’s reach next April. The number of tax-cutting opportunities shrinks significantly after Dec. 31. Too often taxpayers let this deadline slip, says Ellen Minkow, an accountant at the firm MS 1040 in New York. She often finds herself asking clients, “Where were you in November?”

Congress hasn’t enacted wrenching tax changes this year, unlike in 2013. In fact, lawmakers have yet to move on dozens of taxpayer-friendly provisions that expired as of Jan. 1.

Among the most popular: a provision that allows owners of individual retirement accounts who are 70½ and older to give up to $100,000 of their IRA assets directly to charity each year; a federal write-off for state sales taxes instead of state income taxes; and a deduction of up to $4,000 a year for qualified expenses for college or other post-high-school education.

As far as these go, taxpayers should sit tight, says Melissa Labant, a tax specialist at the American Institute of CPAs in Washington. She expects lawmakers will extend these provisions during this year’s lame-duck session—as they have after several similar expirations over the past decade. And as before, the renewals are likely to be retroactive to the beginning of the year, she says.

Internal Revenue Service Commissioner John Koskinen has warned publicly that if lawmakers don’t pass the extensions by early December, the delay will cause problems and could even hold up refunds during the spring tax-filing season.

There are plenty of other issues facing taxpayers. Given the complexity of the current code, with its numerous phase-outs, phase-ins, surtaxes and hidden marginal rates, many people should consider running their actual 2014 tax numbers before year-end to see how they could benefit from specific strategies. 

ENLARGE

This exercise could be crucial, Ms. Labant says, for taxpayers who have had a significant change in income or a major life event—such as a birth, death, marriage, divorce, retirement, the sale of a home or a job change. In particular, a temporary drop in income can present opportunities.

Here are key areas to focus on before year-end. [snip] The article continues @ the Wall St. Journal, click here to continue reading....