Make These Four Moves to Decrease 2013 Tax Liability
Making charitable donations, paying some bills early, selling stock for a loss and putting more in retirement accounts in December can help some taxpayers reduce their tax liability. H&R Block advises on how to use these four strategies to lower 2013 tax bills.
“There is still time for taxpayers to impact their 2013 tax liability – they just need to be sure to take actions that work for their situation,” said Paul Ahn, San Francisco District Manager at H&R Block.
With popular tax breaks scheduled to expire Dec. 31, taxpayers need to take action now to reduce 2013 tax liability.
1. Give to others to get a tax deduction.
For charitable donations to be tax-deductible, they must be made to qualified, tax-exempt organizations (IRS-approved nonprofit religious, educational or charitable groups), and claimed as itemized deductions on tax returns. Use the Salvation Army donation guide to estimate values of used clothing and household items, and be sure to keep receipts and pictures as needed to sub- stantiate donations.
2. Pay some 2014 bills early.
Taxpayers can consider pre-paying expenses to take full advantage of some tax breaks that may expire this year.
Pre-paying December mortgage payment due in early January, making an additional student loan payment and paying spring tuition early to take full advantage of the American Opportunity Credit.
Also, the tuition and fees deduction is set to expire Dec. 31. It can still be claimed for tax year 2013, but it might not be available in the future.
3. Offset capital gains with capital losses.
Those with a large net capital gain in 2013 could reduce the tax liability by selling stock before Dec. 31 if it would generate a loss. Also, capital losses not only offset capital gains; if cap ital losses exceed capital gains, up to $3,000 of capital losses can be used to offset wages.
4. Maximize retirement plan contributions.
Taxpayers who have not contributed the maximum to their 401(k) may consider increas- ing pre-tax contributions which could reduce the taxable income and potentially the overall tax bill.
Taxpayers eligible to deduct IRA contributions can make traditional IRA contributions to decrease 2013 income until April 15, 2014, and thus reduce tax liability on 2013 tax returns.
About H&R Block
H&R Block, Inc. (NYSE: HRB) is the world’s largest consumer tax services provider. More than 625 mil- lion tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2013, H&R Block had annual revenues of $2.9 billion with 25.4 million tax returns prepared worldwide.