Not Too Late for Year-End Tax Strategies
CITRUS HEIGHTS, Calif. -- Dec. 31 is only 35 days away. So even if 90% of the year has elapsed, there are still steps you can take to minimize your tax bill.
While ordinary federal income tax rates for 2013 remain the same, the fiscal cliff legislation passed earlier this year affects higher-income individuals and puts them in the 39.6% tax bracket (up from 35%), so it's important to know your rates.
Consider leveraging itemized deductions by bunching deductible expenditures every other year while you take the standard deduction in alternate years.
TaxAudit.com, which defends more than 20,000 Americans under audit each year, offers the following end-of-year tax tips:
- Consider deferring income if you expect to be in the same or lower tax bracket for 2014.
- Consider the tax impact of selling appreciated securities by timing your investment gains and losses. Selling some loser securities before yearend might be a smart tax strategy.
- Take advantage of the special tax breaks available to you if you make charitable contributions directly from your individual retirement account, but be aware that special rules apply.
- Remember that significant lifestyle changes, such as divorce, a change in jobs, retirement or becoming a home buyer affect your taxes.
- Spend down flexible spending accounts before those balances expire.
- Purchasing energy-efficient appliances can mean big tax credits.
In addition, the tax experts point out changes to IRS tax laws effective for 2013, some of which may affect you, so it's advisable to learn more:
- Rules for home office deductions have changed. New this year is a simplified option for a maximum standard $1,500 deduction.
- Rules for depreciation have changed.
- Many refundable credits have ended or are about to end.
- A new 3.8% Medicare investment tax and a 0.9% Medicare health insurance tax will affect many higher-income individuals because of recently enacted health care legislation.
Tax provisions that expire after this year are:
For individuals:
- Above-the-line deduction for certain expenses of elementary and secondary school teachers.
- Deduction of state and local sales taxes.
- Above-the-line deduction for qualified tuition and related expenses.
- Deduction for mortgage insurance as qualified interest.
For businesses:
- Research and experimentation tax credit.
- Work-opportunity tax credit.
- Increase in expensing to $500,000/$2 million and expansion of definition of section 179 property.
- 15-year straight-line cost recovery for qualified leasehold, restaurant and retail improvements.
This is only a short list of some of the new and evergreen tax deductions for 2013, TaxAudit.com points out and so it recommends meeting with your tax preparer before Dec. 31 and learning more about the rules at IRS.gov.
Published by The Business Journal, Youngstown, Ohio.
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