With only a few days remaining in 2013, it is time to complete your year-end tax planning and make your New Year’s resolutions.
Here are planning points you might want to consider:
1. If you can use additional tax deductions in 2013, pay your deductible expenses by Dec 31. If you are short on cash, consider charging your credit card. For tax deduction purposes, plastic works like cash.
2. If you reached age 70 1/2 on or before Dec. 31, 2013, you may need to take a required minimum distribution from your traditional IRA by April 1, 2014. If you’re already taking your required minimum distributions, another may be due by the end of the year. The penalties can be significant, so be sure you know how much you need to withdraw and by what deadline.
3. If you have losses in you stock portfolio, you may be able to save some 2013 taxes by selling your losing positions. Just be sure you do not run afoul of the wash-sale rule, which prevents you from claiming a loss if you repurchase the same security within 60 days before or after the sale date.
4. If you have money accumulated in a traditional IRA, consider whether it would make sense to convert some or all of your savings to a Roth IRA. You will have to pay tax on the conversion, but there are advantages to a Roth IRA – withdrawals are generally tax-free and are not subject to the minimum distribution requirements. It pays to take a look.
5. If you have children or grandchildren, explore a Section 529 college savings program. Many states offer tax incentives to residents who participate in their state-sponsored program.
6. If you are going to reach the age at which you qualify for Social Security retirement benefits during 2014, consider whether you want to take the payments immediately or delay the start of your benefits. A delay may increase the amount you receive monthly.
7. If you do not have a will or if it has been quite a few years since you reviewed it, make an appointment with your attorney and your estate planner for a date early in 2014. If you do not have a will, the laws of your state may determine who inherits your assets.
8. If you have a Section 401(k) plan at work and don’t yet participate, visit your payroll department to set up periodic contributions beginning early in 2014. Do not pass up the opportunity for tax-sheltered investment earnings by delaying your contributions until later in the year.
9. While you are visiting the payroll department, make sure your federal and state income tax withholding is set at an appropriate level. Too much or too little withholding is not financially sound.
Gather your tax information and get it to your tax preparer early in the filing season. With all the tax changes that took place for 2013, you do not want to be unpleasantly surprised just before the due date by a higher amount of tax due.