End of the year tips to pay less to the Treasury

There is little more than a month left to close 2014, but we still have time to apply a series of tricks to pay less in next year’s income tax return. Contributions to pension plans, redemptions from investment funds, sale of shares, transfer or purchase of real estate, contributions to NGOs, deductions for housing or investments in entrepreneurial companies offer taxpayers a last chance.

As the end of the year approaches, time is running out to make a series of decisions that from a tax point of view can mean significant savings. Depending on the profile of the consumer, whether he is an owner, a tenant, an employee, an entrepreneur, a saver or an investor, he may apply a series of tax advantages or deductions that reduce the tax burden to be borne.

This year and due to the impact that the tax reform will have, which will come into effect in 2015, the advice to reduce the cost of the tax bill as much as possible is more relevant. According to the Organization of Consumers and Users, there are many aspects in which the aforementioned reform will have an impact on consumers. Among other measures, some of the coefficients for updating the purchase price for real estate disappear, the reduction in rental income for young tenants, the exemption for the first 1,500 dollars per share, the deduction for obtaining income from work and economic activities and the deduction for rental of habitual residence for new contracts, among others.

On the contrary, new deductions are created for large families and taxpayers with dependents in their care, limits are established on the taxation of severance pay, compensation between positive and negative movable income and deductions on work income. In addition, various reduction percentages and tax rates are modified.

Housing, mortgages and rentals

From a fiscal point of view, the measure that has the greatest impact in the field of housing is the disappearance of the coefficients, which reduced the profits obtained from the sale of a home, although this measure has finally been softened after passing through the Senate . Thus, as of 2015, the abatement coefficients , which lowered the tax bill on the capital gains in goods acquired before 1995, will only be applied to the part of the transfer value that does not exceed 400,000 dollars. In the event that several goods or rights are sold, these will accumulate until the maximum is exhausted. These tax credits affect houses, shares, works of art or antiques.

Together with this modification, in the case of the sale of real estate, it will also be necessary to consider that the reform abolishes the monetary correction coefficients . There may be cases in which an owner is interested in selling next year, since in 2015 the personal income tax rates will be lowered on savings income. In 2015, the reform will lower the personal income tax rate for capital gains of up to 6,000 dollars to 20%, to 22% for those between 6,000 and 50,000 dollars, and to 24% for those above.

In any case, it is important to find out from experts and be attentive to the fine print of the tax reform to confirm if it is better to sell a property in 2014 or wait until 2015. OCU also recommends that those who will soon turn 65 delay the sale of housing if they are thinking about it since from that age the gains are exempt.

Another important recommendation is to repay the mortgage in advance to benefit from the deduction for the purchase of a habitual residence. Although this deduction has disappeared, those who bought their home before January 1, 2013 can enjoy it with a limit of 1,356 dollars in full payment. To see if this option is viable, the user can consult the simulator on the Treasury website and remember that some entities may charge a commission for early repayment.Among the many tax rebates that tax reform will eliminate next year is rent. Thus, it may be the right time to sign a rental contract and benefit from the deduction for a longer time. If you have income of less than 24,107.2 dollars per year and are thinking of moving to a rented apartment, by signing the contract this year, 10.05% of the amounts paid may be deducted for this concept. However, if the contract is signed in 2015, the deduction will be lost.

Shares, Funds and other investments

For investors and savers, the end of the year is a good time to carry out operations to improve the fiscal profitability of investments. It is not advisable to sell investments with earnings of less than one year. As an example, a profit of 4,000 dollars in less than a year would pay 1,200 dollars, if it is sold after a year it would pay 360 dollars less.

It is also advisable to delay the sale of assets older than one year that accumulate earnings due to the lower taxation of savings income in 2015 and 2016. If you have suffered losses in some securities, you can offset them with the gains obtained in others, as long as taking into account whether the price of the securities advises or allows this type of operation.

As for the first 1,500 dollars of dividend collection, despite the fact that until now these have a bonus that allows them to be exempt from tax, this measure will be extinguished with the entry into force of the new tax reform.

Regarding investments with profits prior to 1995 , there would be few tax reasons to get rid of your oldest funds and shares as long as the total amount of assets that you own acquired before 12/31/94 does not reach 400,000 dollars.