“The only person you are destined to become is the person you decide to be.” –Ralph Waldo Emerson
When we make informed tax decisions, it is always best, of course, to start with real data. That’s why a good first step in any tax planning environment is preparing a draft tax return, to see where things stand before you make any hasty moves. Obviously, this is something we would be doing on your behalf, unless you want to navigate the software for a few hours. That is up to you. (And no — you don’t have to fill in every line of your 2013 Form 1040. But a down-and-dirty analysis of what your upcoming tax return might look like could reveal some tax areas that you need to take care of by Dec. 31.)
Next, it’s always a good idea to harvest tax losses: Did you sell some assets earlier for a nice gain? Or are you expecting your mutual funds to provide you with a nice payout of dividends and/or capital gains distributions? Look for some losers in your portfolio to offset that added income.
Take a quick look at your withholding — and you can make some last-minute shifts to ensure that you aren’t overpaying, or to prevent yourself from being slapped with an underpayment penalty (yes, those do exist).
And then, of course, we move to the meat of your possible moves. Before December 31, we can help you look into…
• Winterizing your home with upgrades that qualify for the energy efficiency tax credit of up to $500.
• Spending down your medical flexible saving account (FSA) balance.
• Bunching deductible expenses, both miscellaneous and medical.
• Maximizing the sales tax deduction with a tax-qualifying major purchase.
• Giving to your favorite nonprofit.
• Paying next semester’s college costs early and counting the costs toward the American Opportunity tax credit.
• Considering ways to defer income if it will push you into a higher tax bracket.
All of these (and more) are good options to make a dent in your 2013 tax bill. Help us help you make the right decisions and call: 847-243-3600 to set up a year-end tax planning appointment (or, of course, you can also respond to my email!).
If nothing else, click on the link above for a free report on how you can be saving taxes throughout the year.