Telling Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.
To the tune of “It’s Beginning to Look a Lot Like Christmas.”
It’s beginning to look a lot like Tax Time,
Everywhere you go.
Take a look in the tax pro’s den, stuffed so full once again,
With year-end tips all filers need to know.
It’s beginning to look a lot like Tax Time,
April’s just months away.
But the smartest move to make is the tax break you can take
Before New Year’s Day.
Things are still tight for many of you. Remember, if you are buying a Christmas tree, in the eyes of a child, they are all 30 feet tall.
Sign up for health insurance by December 23, 2013 for coverage on January 1, 2014. If you enroll by March 31, 2014, federal penalties won’t apply, but you must enroll by December 23, 2013 to be covered on January 1, 2014. If you change coverage after January 1, 2014, you might have two deductibles for 2014. See your health insurance consultant for details.
ObamaCare: Qualifying For Premium Assistance Credit
If you are one of the millions who are not exempt from the health care law, you may qualify for an offset against the premium if your income is less than 400 percent of the federal poverty level, and you buy insurance through a government-run exchange.
Here’s a calculator to help you determine if you qualify for the credit, what the maximum cost of your insurance, and what penalty you would be assessed for not having insurance. And remember, ObamaCare requirement can change daily.
Fourth Quarter Federal And State Estimated Taxes
The final estimated tax payment for individuals and calendar-year estates and trusts is due January 15, 2014. However, if you pay your state estimate by December 31, 2013, you can deduct that payment in 2013 instead of waiting a whole year to take the deduction. Make sure your payment arrives on time — file online.
Mortgage And Real Estate Taxes Due January 1
Your mortgage and real estate taxes are due on January 1, but if you pay by December 31, you can deduct the interest and real estate tax payment in 2013 instead of waiting a whole year to take the deduction. Exception: if you are subject to the Alternative Minimum Tax (AMT), this strategy may not apply.
Do You Have Unrealized Capital Losses?
The stock market did very well this year, but if you have stocks that didn’t, consider their sale before December 31. The capital loss will offset any capital gains plus an additional $3,000 of other income. If you like that losing stock, however, don’t forget about the ‘wash sale’ rules. This means that your loss will be disallowed if you buy the same security during the period from 30 days before to 30 days after the sale at a loss.
Do You Have A 401(k) Plan?
If you haven’t maxed out your 401(k) retirement, and are able to save a little more, add to your account by December 31. Why?
- Contributions are not subject to any income tax,
- Within limits, you receive not only this tax deferral, but also a tax credit
- The employer match of your contribution if not currently taxable
- You can borrow up to 50 percent from the plan without tax, and with no regard to your credit score, but it has to be repaid within five years, unless for a house, and
- Distributions are exempt from the new 3.8 percent Medicare tax on net investment income.
Attention Seniors! Take Your Required Minimum Distribution By December 31
If you haven’t yet received your distribution, call your agent now. The government can print their own money — don’t give them 50 percent of your late distribution. This also applies if you have an inherited account.
Getting A Year-End Bonus?
Receiving it on December 31 makes it taxable in 2013; receiving it on January 1, makes it taxable a year from now.
One More Thing
Credit Card Companies & Extended Warranties: Did you know that when you purchase a TV, computer, etc., many credit card companies automatically extend manufacturers warranties? But — the entire purchase must be paid for with the card in question. So if you partial pay cash, or partial pay with a gift card, you run the risk of inadvertently nullifying the extended warranty. Suggest purchasing items separately. Check with your credit card company.
QUIP: A computer once beat me at chess, but it was no match for me at kickboxing.
Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website.