In the midst of all the holiday hustle and bustle take time to give yourself the gift of tax savings. The following tax tips could help you save money and minimize your 2013 tax bill, but only if you act before year's end.
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Income you don't receive by December 31 isn't taxed until the following year. While employees on salary don't have much of a choice regarding when they get paid, taxpayers who are self-employed or do freelance or consulting work have more flexibility. By delaying billing until late December, you can postpone the receipt of income into next year. Keep in mind that this strategy only makes sense if you think you will be in the same or a lower tax bracket next year.
Pay Some Bills Early
By prepaying certain 2014 bills in 2013, you may be able to write-off a deduction earlier. For example, if you pay your January 2014 mortgage bill on or before December 31, 2013, you may deduct an extra month of interest in 2013. You can also prepay the first installment of your real estate tax due in 2014. If you could be subject to the Alternative Minimum Tax (AMT), you may want to have your CPA make some projections to let you know if paying some bills such as state income taxes would be better in 2013 or 2014 to lessen or eliminate AMT. A warning to high income taxpayers -- your itemized deductions may be significantly limited in 2013 so be sure to check with your CPA before making your early payments.
Maximize Your Retirement Account Contributions
If you don't have a 401(k) plan, or other employer plan coverage, see if you can contribute to a deductible Individual Retirement Account (IRA)--limits may apply. You have until the tax filing deadline of April 15, 2014 to open an IRA and make a deductible contribution for 2013.
Give to Charity
Charitable donations made before year's end are a great way to cut your tax bill. If you itemize, you can deduct donations on your 2013 tax return. All contributions, regardless of amount, require proof by a canceled check, payroll deduction, credit card charge or a receipt from a charity. And contributions of $250 or more must be backed by a charity's receipt.
A licensed CPA has the advanced education and technical expertise needed to navigate unique complexities of tax law. CPAs are required to uphold stringent professional and ethical standards and can be counted on to be your year-round financial advisor. To make it easy to find a CPA in your area, the Illinois CPA Society offers a free online "Find a CPA" Directory that allows you to do a simple search through a database of member CPAs. Visit www.icpas.org for more information.