Year end tax tips for 2013

 

Year End Tax Tips for 2013

Well here we are at the end of another year. We thought we’d write another year end tax tips like we did last year.
Our number one advice as always is to consult a professional tax adviser sooner rather than later. They can help you mock up your returns to identify any last minute changes as well as provide you guidance for the new regulations in 2014.
The longer you wait, and the closer you get to April 15th, the busier they will be.

Personal Deductions

Teachers get a $250 above-the-line deduction for school teachers. If you’re a teacher, you’ve probably already spent more than this for your classroom and students so you need to report these excess costs as itemized deductions.
The deduction for state and local sales taxes is about to expire. So, this month is a good time to buy high-ticket items that you were going to buy anyway. Buy a new car, boat or big-screen television or expensive monitor after the Christmas rush. You’ll get a good deal especially on last year’s models or dealer’s loaners.
The deduction for mortgage insurance is disappearing next year. The only way you can take advantage of this is to pay January’s payment in December.
If you have taxable capital gains consider selling investments that have declined in value to offset the gains. This year, many stocks have gone up and many bonds have gone down, so you might be able to offset stock gains with bond losses. However, you need to be aware that you shouldn’t sell an investment and then buy back the same security quickly because that can invalidate the tax loss.

Business Deductions

People who own restaurants, retail establishments, and non-residential buildings must generally depreciate leasehold improvements over 39 years. Lately, they’ve had the benefit of writing off the costs over 15 years instead. To keep this benefit for badly-needed improvements, get the work done before year-end and be sure to put the spaces into use by December 31st. One day delay by the construction folks will cut your depreciation by more than half.

 The work opportunity credit has not been renewed. This credit provided rebates to employers hiring veterans and certain groups of workers who have difficulty getting employed. The credit is worth 25% to 50% of the first and second year wages of qualifying employees (up to $9,600). There is still time to hire new workers before January 1, 2014. The difficult part is getting state approval for these new workers in time.

Finally, business owners mulling new software or other office equipment might want to act quickly to take advantage of tax breaks ending Dec. 31.
The special deduction for depreciable property (Section 179 property) is slated yet again to end Dec. 31. Under Section 179, a business can deduct up to $500,000 of the cost of any qualified equipment it puts into service by Dec. 31.  Next year, the deduction drops to $25,000.

Plan your spending and see if you can shift things into 2013. Entrepreneurs typically benefit from minimizing taxes by lowering reportable annual profit. If expenses are due to hit early in 2014, and your business accounts on a cash basis, it might benefit you to incur the costs before the end of 2013. Keep in mind, however, that simply paying out cash rather than incurring a deductible expense will not reduce taxes.

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