6 Midyear Steps to Lower Your Taxes

Tax preparation should be a year-round activity, not just something you do days before the tax deadline. Here are five things to do this summer to help you catch up.

Aug 9, 2014 at 2:14PM


With April 15 not too far behind us, and your 2014 tax returns so far away, it's easy to lose track of things and get a little sloppy in your tax planning.

However, maximizing your tax benefits should be a year-long effort, especially if you want the biggest refund or lowest tax liability possible. With that in mind, here are a few things you should take time to catch up on.

1. Check how much your employer is withholding
Did you get a big tax refund this year? While this may seem counterintuitive, that's actually not such a good thing. When you get a tax refund, it's as if you gave the government an interest-free loan for a year.

If you receive a large refund, it could mean your employer is withholding too much of your paychecks. Now is a great time to double-check your withholding status and see whether you may be entitled to extra exemptions more exemptions than your employer currently claims on your behalf. Take a look at the exemptions worksheet from the IRS to learn more.

Think about it this way: Would you rather have an extra $200 every month to help with your expenses and increase your savings, or would you rather have $2,400 in a lump sum next year?

2. Make sure you're saving the right receipts
Summer is a good time to catch up on your receipts. When you have a few hours to spare, sort through your receipts to make sure you have documentation for all of the deductible purchases and donations you have made so far this year.

And especially don't forget about summer-specific expenses that can lower your tax liability. For example, do you send your kids to summer camp while you work? Depending on your income, the IRS may allow for a credit (better than a deduction) of up to 35% of day camp expenses under the "child and dependent care" category.

3. Get organized
Speaking of receipts and other documentation, summer is a great time to get your tax-planning setup organized. Your system doesn't have to be too complicated.

For instance, I use an accordion file to sort receipts and an Excel spreadsheet to keep track of deductions. Another helpful practice is to print your credit card and bank statements each month and highlight the purchases that qualify as deductions. Make a note of what it is, e.g., "charitable donation" or "business expense." Trust me: It's a lot easier to make notes every few months than it is to remember everything at the end of the year.

4. Spread out your charitable giving
Many people do most of their charitable giving at the end of the year, but it might be easier on your wallet to spread out your donations.

Because charities tend to get the bulk of their money in the winter months, many are hurting for cash during the summer. So, if you were planning to give say, $1,000 to your favorite charities before next tax season, why not give half now? It'll lessen the sting of parting with the entire amount at once, and you'll be giving at a time when the money is really needed.

5. Do some retirement planning
Now that we're past the halfway point of 2014, it's a good time to take stock of your retirement contributions. For the 2014 tax year, you can contribute up to $5,500 (or $6,500 if you're over 50) into an IRA, and you may be eligible for a tax deduction, depending on your marital status, income, and whether or not you're covered by an employer's retirement plan like a 401(k).

If you're behind, don't worry: You have plenty of time to catch up. After all, that's why you're doing this summer tax checkup.

The IRS allows contributions for the 2014 tax year until the April 15 tax deadline. So, even though it's August, you have more than eight months left to contribute -- not just the five months left in the calendar year. So, however much you have left to contribute, consider dividing that number by eight and setting aside that amount every month between now and April.

6. Cut some investment losses
Is some of your portfolio in the red now that the market has declined a bit? The major indexes are still up for the year, so chances are you're sitting on some gains, but now may be a good time to unload some of your losers if you have any.

Why? Investment losses can reduce your income by offsetting gains. Short-term losses offset short-term gains (which are taxed at a higher rate), and long-term losses can offset long-term gains.

If your losses are greater than your gains in a particular year, you can deduct those losses up to $3,000 from your total income for the year. And if your losses are even greater than this amount, you can carry over the remainder to the next tax year.

It'll make your life easier later
With a little extra effort now and throughout the year, you'll be able to make tax season a lot easier on yourself next year, and you might even find some extra deductions in the process.

Take advantage of this little-known tax "loophole"
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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