Mid-Year Tax Planning Ideas by Karla Hopkins

As summer comes to a close and autum approaches the end of the year gets that much closer.  Now is a great time to consider fine tuning your tax plans for 2013.  Here are a few ideas to consider:

·       Harvest Capital Losses.  Don't get stuck at the last minute in December.  Review your portfolio position now and realize those capital losses to offset current or future capital gains plus up to $3,000 in losses against ordinary income.  Under the new tax law, the maximum long term capital gain rate increased to 20% for certain upper-income taxpayers.

·       Are you cleaning out the attic and garage this fall? You can write off donated items that are in good conditiion.  Many organizations including the Salvation Army provide guidelines on the donation value so don't forget to get a receipt when you donate. 

·       The residential energy credit was extended through 2013 so if you haven't done that much desired upgrade to your heating and air conditioning system, this may be the year to do so and benefit for a tax credit.

·       For employees, make sure you are taking advantage of any and all employer tax free benefits.  Take advantage of a tuition reimbursement plan to expand your skills and job performance; fully fund your 401(k) at least up to the employer match; take advantage of the retirement catch up provisions if you are over 50; take advantage of any benefit that you can pay with pre-tax dollars such as child care, tranporation, medical and health costs through a Health Savings Account.

·       Remember that your dependent can earn up to $6,100 tax free.  If you can employ them in your business it's a great way to teach responsibility and to save for college.  Consider also having them contribute to a ROTH IRA.  It is one of the most tax-advantaged savings that the government currently offers.

·       If you are not subject to Alternative Minimum Tax, consider prepaying deductible items such as real estate tax, state income tax estimates and personal property tax.  This could save you as much as 39.6% in taxes.

·       Review your W-4 exemptions and withholdings to date.  Ensure that your are neither overwithholding or under withholdings.  By reviewing them now, you have time to react over the next 5 months instead of just at the end of the year.

·       For businesses who are considered making purchases of equipment, the tax laws consider to be favorable in terms of allowing a deduction of the full amount in the year you acquire the assets.  Don't forget to consider the tax benefit when you are calculating the cost of the equipment.

·       The Work Opportunity Tax Credit is available for certain "target groups" when you hire from the group.  The maximum credit is generally $2,400.  Consider searching for new employees that might meet the requirements for this credit.

·       Contact your accountant just to check in on any transaction or life changes you may have had or are contemplating so that they can advise you on how they might impact your tax returns before the year is over.