Prepare now to take advantage of filing situations
Published 12:00 am Thursday, December 26, 2013
While 2013 isn’t officially over, it’s not too soon to begin preparing for the 2014 tax season.
It also means there are only a few remaining days to make those moves that could pay off big dividends in the end.
CPA Ken Odom of Rabren, Odom, Pierce and Hayes said, “We compiled a checklist of additional actions based on current tax rules that may help you save tax dollars if you act before year-end. Not all actions will apply in your particular situation, but you will likely benefit from many of them.”
The first piece of advice Odom gives is for those participating in employers’ health flexible spending accounts.
“Increase the amount you set aside for next year in your employer’s health flexible spending account, if you set aside too little for this year,” he said. “If you become eligible to make health savings account (HSA) contributions in December of this year, you can make a full year’s worth of deductible HSA contributions for 2013.”
Odom said that tax-deductible contributions to charities and extra mortgage payments are two ways taxpayers can still decrease deductions.
“A deductible contribution by check is considered delivered the day you mail it and if by credit card…the year of the charge,” he said. “Remember the importance of having the proper records required to support cash and non-cash contributions claimed.”
Some charities also accept online payments.
The interest from an extra mortgage payment also is tax deductible, but the payment must be posted in 2013, he said.
“An extra mortgage payment could increase itemized deductions with the additional interest paid, but would need to be received and posted to your account by the mortgage company before year end so it will be reported as paid in 2013 on the form 1098 mortgage interest statement,” Odom said. “This could still be done if paying on line with a post date before Jan. 1, 2014, and the company credits payment as received per the post date.”
Those with students in college should take note that unless Congress extends it, the up-to-$4,000 above-the-line deduction for qualified higher education expenses will not be available after 2013, Odom said.
“Thus, consider prepaying eligible expenses if doing so will increase your deduction for qualified higher education expenses,” he said.
“Generally, the deduction is allowed for qualified education expenses paid in 2013 in connection with enrollment at an institution of higher education during 2013 or for an academic period beginning in 2013 or in the first 3 months of 2014.”
Odom also suggested:
• Consider using a credit card to prepay expenses that can generate deductions for this year.
• If you expect to owe state and local income taxes when you file your return next year, consider asking your employer to increase withholding of state and local taxes (or pay estimated tax payments of state and local taxes) before year-end to pull the deduction of those taxes into 2013 if doing so won’t create an alternative minimum tax (AMT) problem.
• Accelerate big ticket purchases into 2013 in order to assure a deduction for sales taxes on the purchases if you will elect to claim a state and local general sales tax deduction instead of a state and local income tax deduction. Unless Congress acts, this election won’t be available after 2013, Odom said.