By Shirley Pulawski
Tax time may not be right around the corner, but the last quarter of the year is here, so it’s time to get in gear to maximize the potential for tax deductions as the year draws to a close.
If you plan your finances carefully and take a look ahead at your income and the tax code for the 2013 year, you could position yourself for some savings come April 15. None of these tips are any substitute for a conversation with a reputable tax lawyer, but it may help make the most of your income and reduce what you owe.
Plan your charitable donations now
If charitable giving is part of your tax plan, don’t wait until the busy month of December to start making end-of-year contributions or at least making decisions about amounts to allocate and to whom. Put together a list now of reputable charities to which you would like to donate, and budget appropriately.
Increase retirement account contributions
Another way to lower your taxable income is to pay more into your retirement plan if you’re not already maxed out. Ratchet up your 401(k) or IRA contributions to save on taxes owed and boost your retirement security at the same time. Most people under 50 years of age can contribute up to $17,500 (or $5,500 more over age 50) annually, so crunch the numbers and see if this is right for you.
Spend down flexible spending accounts
If you’re in a pre-tax flexible spending program through your employer, check your balance and spend the amount down between now and the end of the year, if possible. Some eligible expenses may include eyewear, medical devices, and even co-payments and deductibles.
Sell off losing stocks
If you have stocks that are worth less than what you paid for them, and you don’t want to hang onto them, you can sell them and take a capital loss on your tax return. While selling the stocks in order to be able to declare the loss on your tax return might only make up for a small percentage of the loss, you can claim up to $3,000 annually. Naturally, there is additional paperwork involved, but if you’ve been looking for a reason to let go of some losers, now could be a good time. '
There is still time left to upgrade to energy-efficient appliances and reap up to a $500 tax credit. This credit was set to expire in 2011, but was extended through the end of this year. If you haven’t taken the credit before, some items which may be eligible include water heaters, furnaces, heat pumps, central air conditioners, boilers, and even building Insulation, windows, and a new roof. In a qualifying furnace, circulating fans installed may also count, as well as other renewable or alternative technologies such as biomass burners of stoves that use qualified biomass fuel.
Other credits have been extended as well. Purchases of plug-in electric drive vehicles, combined heat and power systems, onsite renewable energy systems including ground-source heat pumps, and fuel cells and microturbines are scheduled to be extended until Dec. 31, 2016.
Have a plan and know the rules
This is not a comprehensive list of tax deductions or credits, so spend some time at IRS.gov to learn more about qualifying expenses and eligible purchases, contributions, and gifts. Do a quick run-through of your income and expected deductions to determine what you'll owe, and if there are sound ways to act now and reduce your tax burden.
In general, there is some good news about changes to the tax bracket structure this year. The standard deduction will increase slightly with inflation, and tax brackets have changed. Wolters-Kluwer, CCH announced last month that the changes are expected to result in an increase in savings for many. The firm said couples filing jointly with an income of around $100,000 could expect to pay around $145 less in taxes, while a anyone making around $50,000 and filing as single could expect a savings of about $72.