Prepare Yourself for Tax Season
With the 2013 tax year ending soon, it’s a good time to review your options. A California company called TaxAudit.com has prepared some handy tips for having the least taxing experience possible this year.
The company cautions that, while tax rates for most people are unchanged for 2013, higher income folk will face a top bracket that’s up from 35% to 39.6%. This came as a result of this year’s fiscal cliff legislation from Washington.
Consider “bunching together” your itemized deductions, and taking them every other year, while sticking with the standard deduction on the odd years. TaxAudit said that this allows you to get maximum leverage from your itemized deductions.
Defer income if you think you’ll be in the same (or lower) bracket for the 2014 tax year.
Time your investment gains and losses to minimize losses from appreciated securities. The company advises that you consider selling some “loser” securities before the tax year ends.
Consider making charitable contributions directly from your IRA. Check the rules first, but this may allow you to take advantage of special tax breaks.
Have you bought any energy-efficient appliances during the year? You green behavior may qualify you for some tax breaks.
TaxAudit cautions that some IRS rule changes are taking effect for 2013. For instance, changes in the rules for home office deductions include a simplified option for a maximum $1,500 standard deduction. Some refundable credits are ending, and the rules for depreciation have changed.
The Affordable Care Act may affect higher-income individuals due to the new 3.8% Medicare Investment Tax and a 0.9% Medicare Health Insurance Tax.
You should also be aware that deduction for state and local sales taxes are expiring, as is an above-the-line deduction for qualified tuition and related expenses. Teachers should know that an above-the-line deduction for certain expenses is also expiring.
Above all, you should be aware that the tax year ends with the calendar year. April is therefore not the time to start thinking about taxes. There are things you can do now that might make a difference when it comes time to pay the taxman.
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