Top Ten Ways to Reduce Taxes Right Now

You still have some time in 2013 to take steps that will beneficially affect your tax return. Here are my top ten.
1. Clean out your closet and basement and make donations to Goodwill. Keep the receipts and a record of items donated. You can value the items using the valuation guide at salvationarmyusa.org.
2. Organize your 2013 tax documents and receipts for deductions in one file folder for the year. Summarize the receipts and fill out the tax organizer.
3. If you have a business on the cash basis, delay mailing bills until late December so that payments won't be received until 2014.
4. Donate appreciated stock to charities.
5. Write a check to your favorite charity.
6. Invest in Georgia muni bonds. The interest is tax free.
7. Sell investments that will generate losses to offset any capital gains plus $3,000.
8. Buy supplies and  equipment for your business before yearend.
9. Estimate your volunteer work mileage for the year.
10. Increase your retirement plan contributions to the max.

A Medicare Plan

To get the most comprehensive coverage under Medicare which is available to those turning 65, you should consider signing up for both Medicare premium supplemental plan F and part D prescription drug coverage. This coverage costs about $200 more per month and is in addition to the required part B costs. Medicare supplemental plans reduce the out of pocket costs in co-pays and deductibles.

Some Bad Things Coming

When you file your 2013 tax return there may be some unhappy surprises for some of you. There are 4 major tax increases related to Obamacare funding and 2 high income tax rate increases which affect 2013. The 4 Obamacare tax increases are the .9% Medicare tax on earned income, the 3.8% tax on investment income (interest, dividends, capital gains, rents, and passive income), personal exemption phase out, and itemized deduction phase out of up to 80%. The 2 high income tax increases are the new 39.6% rate and the 20% capital gain rate which affect taxable income of $400,000 single and $450,000 joint. The 3.8% and the .9% tax kick in at $200,000/$250,000 adjusted gross income single and joint. The phase outs of itemized deductions and exemptions start at the $250,000/$300,000 adjusted gross income single and joint. Note that the 4 Obamacare taxes are based on adjusted gross income where the 2 high income tax changes are based on the more favorable taxable income. Note also the marriage penalty built into the new thresholds. The joint threshold isn't even close to being double the single threshold. You may want to check your tax withholding before year end to see if you are withholding enough to cover these new taxes.

Bonus Depreciation

You can still deduct 50% of the cost of business property added before 12/31/2013. To qualify the property must be new and have a recovery period of 20 years or less. Business vehicles still have depreciation limits so you don't get the 50%, but you do get an additional $8,000 bonus depreciation in the first year.