Personally, not much irks me more than being bombarded with advertisements for the upcoming holiday season before we’ve even reached Thanksgiving, let alone Halloween. Fortunately for us Scrooges out there, we may choose whether or not to engage in our nation’s consumer culture; On the other hand, paying your taxes is a duty of citizenship, and the Federal Government doesn’t necessarily perceive evasion-as-a-counter-culture-movement to be a suitable excuse. Luckily, there are quite a few methods to alleviate the damage which taxes inflict upon your wallet, though you may have to act fast to collect some of these benefits.
If Congress doesn’t act to extend certain tax policies by the end of 2013, it may be your last chance to snag a credit or to take advantage of many of this years most popular tax breaks. Even if going green with your home remodel or next vehicle isn’t exactly your style, there are certainly savings to be on the look out for.
In its 2013 Year-End Tax Planning Special Report, tax publisher CCH, lists these sun setting “ tax extenders” and says that taxpayers should consider acting now before year-end 2013 to take advantage of these breaks. “Whether Congress will extend them again is questionable,” the report says. “While all have their supporters, Congress appears likely to take an extremely budget-conscious approach toward any tax provision it may consider.”
With that being said, here is a list of 8 simple individual tax breaks that might be gone by the year’s end:
(For a more in-depth focus on year-end tax considerations, see our 7 part series 2013 Year End Tax Planning Opportunities)
Remodeling your home for energy-efficiency. There’s a $500 tax credit (that’s a dollar for dollar savings) for making certain energy-efficient improvements to your home, such as putting in a new front door, added insulation, or even a corn stove. The credit is 10% of the cost of building materials, so if the cost is $5,000 you get $500 back courtesy of Uncle Sam. One big caveat: The $500 credit applies to cumulative claims for the credit dating back to 2006.
- Get an electric vehicle. A tax credit for certain 2 or 3 wheeled electric vehicles expires at year-end. A separate tax credit of $7,500 is available for 4-wheeled electric vehicles including the 2012-2014 Ford Focus Electric, the 2013 Ford Fusion Energi, the 2013 Ford C Max Energi and the 2011-2012 Nissan Leaf and will be phased out once a manufacturer’s has sold 200,000 vehicles.
- Commuter benefits. The transit parity tax break—putting train commuters on the same footing as car commuters who park so they can defer $245 a month of pretax salary to use for commuting expenses—is in danger yet again. If you commute and your employer offers the benefit, make sure you’re taking advantage of it for the rest of the year. And then for 2014, sign up through your employer, and if Congress extends the break retroactively, you’ll be more likely to be able to get money back.
- Donate conservation property. Through year-end conservationists who donate property or easements on their property to conservation organizations like the Nature Conservancy or a local land trust get an enhanced tax break that’s helped modest-income landowners; these enhancements are good through year-end.
- Charitable contributions from your IRA. If you’re 70 and a half or older, you can transfer up to $100,000 out of your Individual Retirement Account to charity. For some taxpayers, this is more tax-efficient than taking the required IRA distributions, paying income tax on those distributions and then giving to charity and getting an income tax deduction for the charitable gift.
- State and local sales tax. CCH pegs this one as “the most politically backed extender” so you probably don’t have to worry about it going away. But to be safe, if you’re a taxpayer who deducts state and local sales tax (in lieu of state and local income tax) and you’re contemplating big purchases in the near term you might want to make them in 2013.
- Teacher’s classroom expense deductions. For school teachers who buy school supplies out-of-pocket, they get an above-the-line deduction of up to $250 for unreimbursed expenses. So it might pay to stock up on classroom supplies for the whole school year before year-end.
- Exclusion of cancellation of indebtedness on principal residence.Taxpayers who are seeking debt modification or facing a short sale or foreclosure can exclude from income cancellation of mortgage debt of up to $2 million on their home.
- Bizarre ways you can save on Tax (ireport.cnn.com)
- Taxpayers Should Act Now to Take Advantage of IRS Changes (bayintegratedmarketing.wordpress.com)
- 2013 Year-End Tax Planning Opportunities [Part 3/7] (joyoftaxlaw.com)
JDKatz, P.C. is a full-service law firm focused on tax law, business and transactional law, estate planning and elder law. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys, or visit http://www.jdkatz.com.