Tax Tips

Self-employment Tax Strategies — If you’re self-employed and use the cash method of accounting, you can decrease your taxable income by delaying your year-end customer billings until January. You can also increase expenses (decrease your taxable income) by buying supplies and equipment at the end of one year instead of the coming year.

Charitable Donations — Donating to charities before the first of the year counts as a deduction on your return. You can include cash contributions that you charged to a credit card in one year even if you don’t pay the bill until the following year. You can also include checks mailed before year-end (that clear the next). Be sure to get a receipt from the charitable organization.

Retirement Contributions — One way to lower your taxable income for the year is to contribute to or open a retirement plan, such as a 401(k), 403(b), deductible IRA, SIMPLE IRA or SEP.  You could have made contributions for your 401(k)s and 403(b)s up until Dec. 31st. But you have until April 15th, to make a contribution to an IRA.

Bunching Deductions — When deciding whether or not to itemize deductions, your year-end strategy should focus on bunching or claiming itemized deductions in alternate tax years. Where you may not benefit from itemized deductions where your itemized deductions are less than the standard deduction allowed, you can opt to delay that real estate tax payment until the following year; thus claiming the standard deduction in one year and itemizing the next. Be sure to consider the early payment reductions you may forego.

Business Travel — The expense of your daily commute to work isn’t tax deductible. However, if you find that you must travel to secondary or temporary locations — even within your metropolitan area — as part of your job and your employer does not reimburse you for that travel, those expenses may be tax deductible.

Home Office Deduction — If you use a portion of your home regularly and exclusively for business, you may be able to deduct expenses for that portion of the home, including interest, taxes, rent, insurance and utilities. You can deduct business expenses for the use of your home only if the use is for your employer’s convenience. Starting January 2013, there are new easier reporting requirements to simplify the home office deduction.

Year-End Equipment Purchases — Did you know that in many cases you can fully expense year-end equipment acquisitions? Certain limitations may apply, so review the rules carefully.

New vehicle purchase — Buying a new car is a great tax planning strategy. There are deductions related to the sales taxes on the purchase, “bonus” depreciation deductions that take the edge off of other limitations and sometimes the expensing election (where you can deduct much of the expense) may apply. Certain limitations may apply, so review the rules carefully.

Small business health care credit — If you’re a small business owner paying health insurance premiums, there is a health care credit for the premiums you pay.  The credit is now a refundable credit which means you may still get a refund even if you pay no tax.

Amend Prior Year Returns — Now’s your best time to take a second look at your prior year tax returns for corrections. Are you taking all the deductions you were entitled to? How about tax credits? Did you know you have a 3-year window to make any changes and get a refund?