It’s not too late to consider tax moves that could reduce your 2013 taxes and get you in a better tax position for 2014. Here are some ideas:
- Be aware of higher tax rates. In 2013 the top tax rate has been increased to 39.6% for top bracket taxpayers (with taxable income over $400,000 for singles, $450,000 for married taxpayers). In addition, singles with income greater than $200,000 (or $250,000 for married taxpayers) will be subject to the new 3.8% surtax on net investment income. If you believe that you will be close to this limitation, consider making moves that will defer income into 2014.
- Take advantage of tax-deferred accounts. All of the new tax rates and phase-outs are based upon adjusted gross income or taxable income. The most efficient way to reduce both of those items is to maximize contributions to tax-deferred retirement plans. If your employer offers such a plan, make maximum use of it (such as a deferred compensation plan). If not, see if you are eligible for your own deductible IRA.
- Consider a health savings account (HSA). Investing in an HSA gives you a current-year tax deduction, while providing a savings account to use to pay out-of-pocket medical expenses currently or in the future. An HSA is not a “use it or lose it” plan. Any funds in the plan can be used in future years. And be aware that you can fully fund your HSA up to April 15th of the following year.
- Make charitable gifts from your IRA. Seniors age 70½ and older can make charitable contributions directly from their IRA. While this won’t be deductible, it can apply against your annual required minimum distribution (RMD), thereby lowering your adjusted gross income.
For guidance with your year-end tax planning, contact our office
IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with Treasury Department regulations, we inform you that any U.S. federal tax advice contained is not intended or written to be used, and cannot be used for the purpose of (i) avoiding penalties that may be imposed under the U.S. Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.