The end of the year is rapidly approaching. That means now is the time to consider your tax situation and the steps you could take to lower your 2013 tax liability. Here are a half-dozen options that might fit your situation.
1. Review your investments and start thinking about offsetting gains and losses for the year. You can deduct $3,000 of losses against ordinary income.
2. Be sure you set aside the maximum allowed in your retirement plans. This year you can put $17,500 in a 401(k) plan, $12,000 in a SIMPLE, or $5,500 in an IRA. Additional amounts can be contributed if you’re 50 or older.
3. December 31 is the deadline for taking a 2013 required minimum distribution from your traditional IRA if you’re 70½ or older. Miss this requirement and a 50% penalty could apply.
4. Start a retirement plan for your small business. You may be entitled to a tax credit of up to $500 in each of the plan’s first three years.
5. Buy needed assets for your business before year-end to utilize the first-year expensing option (Section 179) of up to $500,000 for 2013. New asset purchases might also qualify for 50% bonus depreciation.
6. Install energy-efficient improvements to your home; you might qualify for a lifetime tax credit of as much as $500. Solar improvements such as water heaters or panels may be eligible for a credit of up to 30% of the cost.
For a more complete look at ways to cut taxes in your particular circumstances, call our office for a year-end planning appointment.