Three Year-End Tax Savings Tips

Yes, the ball is about to drop and we will be ringing in the New Year but you still have a few days to take some steps to lower your 2013 tax bill

CHARITABLE DONATIONS: Start the New Year out fresh by doing a last minute cleanout of closets and storage areas.  By doing so you can turn unwanted clothing and household items into tax savings. By using the valuation guide from the Salvation Army you simply apply a value to the items you are donating, take your donations to a place that will give you a receipt by December 31st   Attach the receipt to the itemized list; the total of the list will be used as part of your itemized deductions, lowering your taxable income. The valuation guide can be found at http://satruck.org/donation-value-guide.

You still have time to make charitable donations by cash, check or credit card. If you make the donation by check it must be mailed by December 31st. Credit card donations count as long as you make them by December 31st even if you don’t pay the bill until 2014.  To count, all donations must be made to an IRS approved charity. Use the IRS Select Check tool at IRS.gov to see if an organization is qualified.

If you are age 70 ½ and over the qualified charitable distribution allows you to make a tax free transfer to charitable organizations of up to $100,000 from your IRA.  The amount of the donation can be used toward your required minimum distribution and excluded from your gross income.  This can be done even if you don’t itemize. This special provision is set to expire at the end of 2103.

CONTRIBUTE TO RETIREMENT ACCOUNTS: You need to contribute to 401k plans by December 31st for it to count toward 2013. On the other hand you have until April 15, 2014 to open an IRA or make a contribution to an existing IRA and still have it count toward 2013.

Low to moderate income worker can also claim the Retirement Savers Credit. Eligible workers who contribute to IRAs, 401(k) s and other workplace retirement plans can earn a credit on their Federal tax return. The maximum credit is $1,000 or $2,000 for married couples.

GET ORGANIZED: Start pulling all of your receipts together to make your visit with your tax preparer smoother. It can be as simple as putting your receipts in a shoebox or creating spreadsheets. It is best to keep all tax related receipts and records.  Getting organized and keeping good records will save you time and help your tax preparer to prepare a more accurate return next year.

 

Yes, the ball is about to drop and we will be ringing in the New Year but you still have a few days to take some steps to lower your 2013 tax bill

  1. CHARITABLE DONATIONS: Start the New Year out fresh by doing a last minute cleanout of closets and storage areas.  By doing so you can turn unwanted clothing and household items into tax savings. By using the valuation guide from the Salvation Army you simply apply a value to the items you are donating, take your donations to a place that will give you a receipt by December 31st   Attach the receipt to the itemized list; the total of the list will be used as part of your itemized deductions, lowering your taxable income. The valuation guide can be found at http://satruck.org/donation-value-guide.

You still have time to make charitable donations by cash, check or credit card. If you make the donation by check it must be mailed by December 31st. Credit card donations count as long as you make them by December 31st even if you don’t pay the bill until 2014.  To count, all donations must be made to an IRS approved charity. Use the IRS Select Check tool at IRS.gov to see if an organization is qualified.

If you are age 70 ½ and over the qualified charitable distribution allows you to make a tax free transfer to charitable organizations of up to $100,000 from your IRA.  The amount of the donation can be used toward your required minimum distribution and excluded from your gross income.  This can be done even if you don’t itemize. This special provision is set to expire at the end of 2103.

  1. CONTRIBUTE TO RETIREMENT ACCOUNTS: You need to contribute to 401k plans by December 31st for it to count toward 2013. On the other hand you have until April 15, 2014 to open an IRA or make a contribution to an existing IRA and still have it count toward 2013.

Low to moderate income worker can also claim the Retirement Savers Credit. Eligible workers who contribute to IRAs, 401(k) s and other workplace retirement plans can earn a credit on their Federal tax return. The maximum credit is $1,000 or $2,000 for married couples.

  1. GET ORGANIZED: Start pulling all of your receipts together to make your visit with your tax preparer smoother. It can be as simple as putting your receipts in a shoebox or creating spreadsheets. It is best to keep all tax related receipts and records.  Getting organized and keeping good records will save you time and help your tax preparer to prepare a more accurate return next year.

 

Don’t Shy Away From a Home Office Deduction

The eligibility rules for claiming a home office deduction have been loosened to allow more filers to claim this break. People who have no fixed location for their businesses can claim a home office deduction if they use the space for administrative or management activities, even if they don’t meet clients there.

Many taxpayers have avoided the home office deduction because it has been regarded as a red flag for an audit. If you legitimately qualify for the deduction, however, there should be no problem.

You are entitled to write off expenses that are associated with the portion of your home where you exclusively conduct business (such as rent, mortgage interest, real estate taxes, utilities, insurance and housekeeping). The percentage of these costs that is deductible is based on the ratio of the square footage of the office to the total area of the house.