It's finally here! Everyone's favorite month.
The final 31 days in which you can take steps to reduce your 2013 tax bill.
What? You thought I was talking about Christmas? C'mon! If you've been reading the ol' blog for the last eight years, you know I started my tax musings by referring to any consideration of taxes as the most wonderful time of the year.
And while taxes must share at least 25 of December's days with the big annual gift-giving event, this final month of the year is a great time to give yourself a smaller tax bill.
So here's my early Christmas present to you in the form of tax moves to make this final month of the year.
Do a draft tax return: No, You don't have to sit down now amidst all the holiday chaos and 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.
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.
Adjust your withholding: You might discover that you've overpaid Uncle Sam and are getting a refund. Or perhaps the outlook is for a bigger than expected Internal Revenue Service bill next spring. In either case, get to your payroll office now and submit a new W-4 to adjust your withholding. Or figure out how much more you'll need to pay in estimated taxes on Jan. 15. Or both.
Yes, you don't have many paychecks left. And yes, it's no fun paying Uncle Sam in the same month in which you're Christmas shopping.
But if you owe a lot when you file, you could owe even more because of underpayment penalties. Paying that bill, or at least some of it now, could reduce or eliminate that added charge.
Just make a note to readjust the amount taken out of your pay when January arrives.
More year-end tax moves: In addition to fine-tuning your withholding and harvesting tax losses, in the next 31 days you also should look into:
- Adding to your 401(k) or other company-sponsored retirement plan.
- 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 count the costs toward the American Opportunity tax credit.
- Considering ways to defer income if it will push you into a higher tax bracket.
You can read more about these tax-saving year-end moves in the Weekly Tax Tip.
If you prefer audio info, check out my recent tax talks with some radio stations. Be sure to turn up the MP3 player's sound to get the full effect of my mellifluous tax advice:
And there are more December Tax Moves in the ol' blog's right column, conveniently located under the year-end countdown clock.
I know, your December to-do list is almost as long as Santa's record of good boys and girls.
But consider adding at least a few tax tasks to your holiday itinerary. They might shave enough off your 2013 tax bill to help cover the costs of your Christmas gifts.
And that's something to make all of us very, very jolly!
