With just two weeks left in 2013, there are some last-minute money moves to make in order to shrink tax bills in April. Tara Lynn Wagner filed the following Money Matters report.
The tax deadline is months away, but now is actually the ideal time to sow some financial seeds that will reap you benefits next April.
“If you wanted to go a long way to minimizing your expenses and saving money for the future, finding ways to do it through strategic tax planning is really the key,” said John Vento, a certified public accountant.
For starters, before ringing in the new, say goodbye to the old.
“Clean out your closets, empty out your attics, take those old things that you know you are never going to use anyway and bring them down to a good cause, good charity, Red Crossm whatever the case may be. Those items may be tax deductible,” said Vento.
The same goes for any monetary donations you made throughout the year, provided you saved receipts. And remember you have to itemize in order to see that deduction.
Saving for the future can also save you money in 2014, provided you choose the right vehicles.
“You can contribute up to $17,500 to your 401k by December 31 and that’s pre-tax, so you’re not being taxed on that money, and you’re lowering your taxable income,” said Lisa Greene-Lewis, a CPA at TurboTax
Over 50? You can squirrel away even more, another $5,500, but this has to be arranged through your payroll department as the money needs to come directly out of your check.
Depending on where you live you may also save on state income tax by setting money aside for your child’s future. Thirty-four states offer a tax deduction for money contributed to a 529 plan.
Had a good year on Wall Street? The maximum rate on capital gains jumped to 20 percent this year. Vento says you can avoid that tax by offsetting gains with losses.
“If sitting in your account, you have stocks that you are holding that also had losses this year, you may want to consider selling off those losers before December 31,” Vento said.
While you're thinking about taxes, it doesn't hurt to start getting all your ducks in a row. The sooner you file, the sooner you can get back what you saved with all these strategies.
“With the average refund being at about $3,000, you might want to start your taxes early,” Greene-Lewis said.