Last Minute Tax Saving Moves
This is Your “Two-Minute” WarningAbout the time the leftovers are used to make turkey sandwiches, is when a lot of people start their tax planning. 2013 was a year of new and higher taxes, so if you are just now beginning to plan, your options are real limited. All is not lost, however, and here are some items to consider.
High-income taxpayers potentially face a series of new taxes:
- .9% tax on wages and self-employment income that exceeds $200,000 ($250,000 for joint filers)
- 3.8% tax on certain investment income if Adjusted Gross Income is over $200,000 ($250,000 for joint filers)
- A new 39.6% tax bracket applicable to net taxable income in excess of $400,000 ($450,000 for joint filers)
- 20% maximum tax rate on long-term capital gains for taxpayers who find themselves in the 39.6% income tax bracket
Now, more than ever, the timing and amount of transactions can make a big difference. One large income or gain transaction could expose a taxpayer to several of the new taxes listed above. Deferring bonuses or using installment sales may be techniques for splitting income between one or more years.
At the same time you are evaluating the health insurance exchanges and your coverage options, take a close look at those policies that qualify you for a Health Savings Account (HSA). You’ll have to take on a higher deductible, which usually results in a lower premium. At the same time, you can contribute to your own HSA. Contributions to a HSA are fully deductible, though limits apply based on age and coverage. When money from the HSA is used to pay for out-of-pocket expenses (prescriptions, co-pays, etc.), these withdraws are entirely tax-free. This is like having your cake and eating it, too! Even better, HSA accounts are not subject to the “use it or lose it” rule applicable to most flexible spending accounts at work. They can become an accumulation tool for future medical expenses.
Business owners have a limited opportunity to accelerate equipment purchases (including certain vehicles) into 2013 and dramatically lower their tax bill. The option to expense equipment purchases this year is limited to $500,000, and is scheduled to dwindle to $25,000 in 2014. Don’t wait too long, though. In order to qualify for this deduction, the equipment has to be delivered and placed into service by the end of the year. Merely ordering the equipment by year end won’t qualify.
More opportunities may be available based on your unique situation, so give us a ring today!