This time of year is filled with a lot of hustle and bustle, from finding that must-have toy to fitting concerts, family gatherings, and work parties into your schedule. Consequently, tax planning might be the last thing on your mind, but waiting until April to think about taxes can cost you in unclaimed deductibles and credits. By taking action now, you can get the maximum tax benefits when filing time comes around. Plus, it’s never too early to start thinking about next year’s taxes. Here are some year-end and new-year tax tips that can make filing less stressful and more financially rewarding.
Year-end tax saving tips
With a few more weeks before year-end, there’s still time to find deductions to maximize your savings:
Strategies for work
- If you’re expecting a year-end bonus, you can lower your 2013 tax bill by deferring your bonus until January 2014. (Of course, you’ll have to pay taxes for the bonus on your 2014 taxes.)
- If you’re not on track to max out your retirement contributions, check with your employer and see if you can direct any year-end bonuses to your plan. You can also increase your 401(k) or IRA contributions. You’ll boost both your retirement and tax savings.
- If you’re 50 or older, you can make “catch-up” contributions to your IRA or 401(k) above the regular limit to reduce your taxable income.
- If you moved for a new job this year (and your new job is at least 50 miles farther away from your old home than your old job), you can deduct the cost of moving and 24 cents per mile plus parking and tolls. The IRS has details about this deduction here.
Charitable giving strategies
- Holidays are for gift giving, and with festivities in full swing, make sure to keep records and receipts as proof of any charitable donations you make so you can itemize them.
- Prepaying any planned donations for 2014 now can reduce your 2013 bill because your total itemized deductions will be that much higher.
- Now is also a great time of year to clear out unused items. If you’re donating clothes and household items, estimate their value with this free valuation guide from Goodwill.
Tax tips for the new year
When 2014 sets in, start the year off with these tax tips:
- Review your retirement plan so you can maximize your contributions without scrambling at the end of the year. Learn more about retirement accounts here.
- If you consistently get a big tax refund, you’re paying too much income tax and missing out on dividends that money could earn throughout the year. You can lower the amount of tax deducted every paycheck by filing a W-4 form with your employer. Use a tax-withholding calculator to estimate how much you can save.
- Once you’ve filed your taxes, take advantage of free shred days like the ones offered by SAC FCU to destroy any sensitive tax information you don’t keep on file.
- Planning home improvements in 2014? If you install alternative energy equipment such as solar electric systems, a solar water heater, or geothermal heat pumps, there’s a no-cap tax saving equal to 30% of your total costs, including labor. See a detailed explanation here.
Deductibles are there for the taking and it’s not too late to make incremental changes that can impact your 2013 or 2014 tax bill. Start planning now and use these tax tips to take advantage of all eligible savings and keep more of your pre-tax dollars.
What are your best tax savings strategies for 2013? Share your best tips in the comments.
Don’t forget these common tax deductions:
- Depreciation for a computer or cell phone if your employer requires it to perform your job
- Depreciation on your home computer if you use it to generate income
- Out-of-pocket expenses for books and supplies deductible by teachers and aides
For more tax tips, check out these soon-to-expire tax provisions for 2013.