Year End Tax tips
With Thanksgiving approaching the year is rapidly coming to an end. The holiday season is a great time to implement tax saving strategies before the year is over and the following are some possibilities that you might want to utilize:
1. Think about a New Year’s Bonus instead of a Christmas Bonus! By delaying your bonus by only a week, you can push the payment of taxes on the income 15 months into the future — a year from next April.
2. This is a great time of year to donate to charity. You can clean out the old clothes, sporting goods, books, and other household goods that you no longer use and welcome the New Year by helping others and get a quick tax deduction to boot. Document all donations by making a list of the items at the time you donate them and please remember to obtain a receipt.
3. Payments made by credit card are deductible in the year they are charged, not the year they are paid, so you can donate to your favorite charity by December 31 and not pay the bill until next year.
4. Some employers will allow you to catch up on contributions by increasing your deduction on your last paychecks of the year. If you are 50 or over, don’t forget that you can contribute an additional $5,500 “catch-up” contribution in addition to the regular 401(k) or 403(b) $17,500 limit for 2013.
5. Be mindful of the balance in your Flexible Spending Account. A wonderful fringe benefit, these helpful plans allow you to set aside a portion of your salary before taxes for certain purposes, such as child care or health care expenses.
6. Itemize! Medical expenses are only deductible when they exceed 10% of your adjusted gross income (still 7.5% if you are over 65). If your income is low this year or your medical expenses are high, speed up your deductions accordingly. If you want to take the deductions this year, pay any outstanding medical bills before year-end, stock up on prescriptions, get new glasses, and pay your health insurance premiums before the end of the year.
7. Estimate your taxes and see if you need to make any last minute tax moves. The IRS treats income taxes withheld from your paycheck as if they were paid in equal amounts throughout the year. So if your calculations show you’ll owe money, you can increase the withholding on your last paychecks of the year to make up the difference.
8. You can deduct union dues, legal and professional fees relating to tax and investment advice, and unreimbursed employee business expenses of mileage, equipment, education, and supplies, among other things. If you pay a lot of expenses for your job or your investments, gather up the receipts and cancelled checks so you can save more money when you file your 2013 taxes.
I hope these items assist you in minimizing your taxes and if you want to discuss any item of end of the year tax planning please feel free to give me a call. Lastly, don’t forget to have a great holiday season!
Robert A. Housman
310-276-3550
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