With the end of the year quickly approaching, now is the perfect time to look for ways to reduce your 2013 tax burden. Several popular tax breaks are currently slated to expire on December 31. In past years, Congress has extended many popular tax breaks, but with looming deficits and discord in DC, there is no telling what lawmakers will do this time around.
Some of the tax breaks set to expire on December 31, 2013 include:
Energy Credits – An energy credit is available for certain energy efficient improvements including doors, windows, heat pumps, furnaces, central air conditioners and water heaters. The credit is equal to 10 percent of the product cost and taxpayers are limited to a $500 lifetime limit for the credit, as well as a $200 cap for windows and doors. Extension of this credit is uncertain so act quickly because installation needs to be completed by December 31.
Mortgage Insurance Premiums – The IRS currently allows mortgage insurance premiums to be treated as qualified mortgage interest for taxpayers under a certain income limit. Look at refinancing your mortgage early next year if this tax break is discontinued.
IRA Distributions to Charity – Individuals age 70 ½ or older are allowed to donate up to $100,000 from their IRA directly to charity. Donating directly to a charity has a number of tax advantages. Charitable IRA rollovers, unlike other donations, are not subject to percentage limitations. Also, donating these assets, rather than taking minimum required distributions, keeps adjusted gross income (AGI) down and helps avoid certain negative tax consequences that come along with higher AGIs.
Deductions for Teachers’ Expenses – Teachers are allowed to deduct up to $250 for money they spend buying supplies for their classrooms. This deduction will most likely be extended. However, if you are a teacher and you expect to buy more supplies this school year, make sure to stock up before December 31 to guarantee your tax break.
Business Incentives – For 2013, businesses can expense up to $500,000 of qualifying equipment under section 179 (subject to certain restrictions) and can take 50 percent bonus depreciation on certain new equipment. In 2014, the section 179 expense is expected to be reduced to $25,000 and bonus depreciation is expected to go away.
The above is a summation of complex tax law. Please check with your tax professional before making a decision. Our CPAs at Milliken, Perkins and Brunelle are available to assist you any time of year.