Year end Tax Tips
Our trusted DMCNY accountant offers us—again—a gaggle of useful tips for tax and financial planning at yearend 2013. [David, watch out! We’re going to have to make this an annual thing!]
A health savings account. These provide a great tax break, even if you don’t itemize your deductions. And the money helps you pay medical expenses. Keep in mind, if you don’t use all of the money in one year, you may carry it to the next year, even if you change jobs.
Party time. You can only write off half of your business meals and entertainment expenses. But if you hold an event, like a party, a picnic or a BBQ, for the entire company, that’s 100% deductible.
Obamacare. If you are having trouble understanding the new law (and who isn’t), go to: http://www.youtube.com/watch?v=JZkk6ueZt-U&feature=youtu.be
Married couples of the same sex. All who are legally married will now have to file federal returns as married, even if they live in a state that doesn’t recognize their marriage. The rules for state returns depend on the law of the state where you live.
December 31 is the last day to set up and deposit up to $51k into your solo 401(k). It’s also the deadline for setting up your Keogh retirement plan.
New York State driver’s license. You may have to forfeit your license if you owe more than $10k in taxes.
Warm up. If you are retiring and want to move someplace warm, look into 3 questions: How the state taxes retirement income; what the sales and real estate taxes are; and whether there is an estate tax. Keep in mind that states offering tax breaks in one area may raise revenue by taxing other activities. State rules vary widely. One place to start your research is http://www.taxadmin.org.
The tax man cometh. Starting January 1, 2013, for married couples with income over $250k (and singles above $200k), there is a 3.8% tax on investment income, including dividends, capital gains and rental income. There will also be a 0.9% tax on wages above those amounts. The top tax rate is now 39.6%. So, it makes sense to keep taxable bonds, REITs, and high paying stocks in your tax-deferred retirement accounts. You can then keep tax-exempt bonds in your regular investment account, since those earnings are not included in income for this tax calculation.
For any further questions, club members may reach David at email@example.com.