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8 year-end tax moves to make now

The year is nearly over, and so are your opportunities to make some moves that might help you save on income tax.

By Dec 3, 2013 12:09PM

This post comes from Erin Baehr at partner site on MSN MoneyWe still have some time before income taxes need to be filed, but when the clock strikes midnight on Dec. 31, it will be too late to make these tax moves that just might save you some money.

Income tax numbers at the accountant1. Clean out your closet

Got stuff? Spending your holiday vacation cleaning may not be fun but it can be profitable. Donating those old clothes (if you are itemizing deductions) can give you a last-minute boost. Be sure the items are in at least good condition, make a list and get a receipt. It will be up to you to value your items; both the Salvation Army and Goodwill have guides on their websites.

2. Donate from your IRA

If you plan to make cash contributions to your favorite charity in the near future and are at least 70½ years old, consider making your donation directly from your IRA. While it’s true you could take the IRA distribution, donate the money, and take an equivalent tax deduction, sometimes it doesn’t quite work out that way.  You could end up on the short end of the equation if the withdrawal causes more of your Social Security income to be taxed, or reduces your medical deduction because your adjusted gross income is higher. And you may not have enough deductions to itemize anyway; then the deduction is lost completely. Donating directly bypasses all those unintended consequences. It may even satisfy your required minimum distribution.  But hurry -- this tax benefit expires at the end of 2013.

3. Button up your home

Earlier this year Congress extended the credit for qualified energy-efficient improvements to your home, but only through the end of 2013. You may be qualified to receive a credit of 10% of the cost of certain upgrades, like insulation, energy-efficient water heaters, doors and windows; there is a lifetime maximum of $500 ($200 for windows). There is also a larger credit of 30% available through 2016 for alternative energy improvements such as qualified solar equipment and wind turbines, with no limit.

4. Stock up your classroom

Another deduction due for extinction at the end of the year is the educator expense deduction.  Public and private school K-12 teachers may deduct up to $250 of expenses for classroom supplies and materials on the front page of their tax return. That eliminates the need to exceed the miscellaneous itemized deductions floor of 2% of adjusted gross income before expenses can be deducted. Expenses beyond the $250 can still be deducted on Schedule A subject to that floor.

5. Go car shopping

One more deduction going by the wayside is the deduction for sales tax. This can come in handy if you live in a state with no income tax or if you pay little or no income tax. Currently you may deduct either state and local income taxes paid or sales tax. The sales tax amount can be either the actual sales tax paid for the year, or a calculated amount (based on income and exemptions) plus sales tax paid on the purchase of certain motor vehicles, boats and aircraft. If taking the sales tax deduction is more advantageous for you and you are planning to buy a car soon anyway, all else being equal, doing it before year-end may save you some money.

6. Lump together your itemized deductions

Speaking of those miscellaneous itemized deductions, it can be hard to meaningfully exceed that pesky 2% floor, as well as the now-10% floor for medical expenses (still 7.5% if you’re older than 65).  By planning out your expenses to lump them together, you can get more bang for your buck.  For instance, you can accelerate some expenses into this year, or delay into next, and do the same at the end of next year so that larger amounts fall within one year.

7. Beef up or start a 401k

While IRA contributions can be made as late as April 15, contributions to 401k plans must be made by year-end to count for 2013. Not all taxpayers qualify to deduct IRA contributions, and adding to your 401k up to the maximum may be your only chance to get a tax deductible retirement contribution. If you can make up the cash flow shortage with other funds, bumping up your contribution percentage between now and year-end can help you get to your max.

For those self-employed business owners (ideally with no other employees) looking to stash some cash, consider establishing a solo-401(k) plan now; you can not only sock away the individual maximum, but can also add a contribution of up to 25% of your compensation or 20% of business profit, up to a total maximum of $51,000 for 2013 for those under age 50, and $56,500 for those 50 and older. That adds up to be considerably more than a contribution to a SEP-IRA.

8. Pay college tuition early

The American Opportunity Credit gives qualified taxpayers up to $2,500 each year for the first four years of a college education. To get the full $2,500 you need $4,000 of qualified educational expenses (paid during the calendar year, not the school year). For many schools, it’s no problem coming up with that and much, much more, but if your child goes to school at a community college or perhaps just one semester at a state school, you might be short. You can count tuition paid by loans, but not by scholarships or grants, so if your child received those, that can leave you short as well. You don’t want to leave money on the table if you can help it! Consider paying next semester’s tuition in December, or at least enough of it to get the maximum; tuition paid in the current year for semesters beginning in the first three months of the following year is eligible for the current year credit.

More from

Dec 16, 2013 7:41AM

The problem in this country is not Repubs or Dems, it's the need to amass personal wealth to "keep up with the Jones's". The divide has been created to separate the "Affluent" from the "Common". All the people here are whining about what each party has or hasn't done like some silly parlor game hurling insults at each other like kids with water balloons. One commenter said we are becoming a third world country I think he's partially right. A large third world country for the common and a first world country for the wealthy. By the way the Wealthy don't create jobs they create wealth. The problem I have is when a wealthy person is treated differently by the legal system. Mr. Couch 16 yr old in Texas gets no jail time for murdering four people and injuring God knows how many others. He goes to a swanky resort style rehab center because he "suffers" from "Affluenza" What would have happened to you if you were in his shoes and Mommy and Daddy wasn't rich? Right, two separate unequal standards of law. We need to stop yelling and pointing fingers at each other and we need our government reps to represent "Us" the way they are supposed. Our country is becoming a Fascist State, this 16 yr old kid with "Affluenza" is the first obvious sign. If this is what happens when you are "successful" then you can keep it. If Success means I can murder people and get away with it you can keep it. I am happy with my common person income, house and car. People better start holding government accountable as one nation of people under God, indivisible? We need to work on that part.

Dec 3, 2013 4:13PM
Obama keeps making a living more difficult for all of us, sure hope someone who cares for we the people gets in next go round!!!! I hope this guy burns in hell for him dropping the hammer on the working people and lying to all of us. 
Dec 3, 2013 4:36PM
 This is only for tax payers so move along leech democrats there must be some welfare papers to fill out.
Dec 3, 2013 5:58PM
Do you think the Obamas would put me up at the White House?  You know, just until I get caught up on the new taxes?  Now that would really be "Obamacare"!!!
Dec 16, 2013 8:56AM
This should be no surprise ..we've been warned...but nobody listened ..and the liberal media kept churning out it's pro-Obama propaganda...This is all part of the "grand scheme" of  redistribution of wealth....along with Obama care..and the middle class will suffer the most...and everyone who voted for Obama is responsible for letting this happen, and should feel ashamed.
Dec 16, 2013 8:41AM
Thank you Mr. Obama.  You are making us pay for our own demise by taking more and more money from us and using it for your 'own pleasure', 'pet projects', and giving it to those who are our enemies and those who feel entitled to it.  Our taxes have gone up on everything, our social security increases are miniscule, health care and prescriptions are astronomical, food costs have skyrocketed, and we cant' find decent jobs.

Please Mr. Obama, PLEASE, go find another job you're qualified for, or is that why you are in office?  Is it that you can't find a job you're really qualified to do either?

Give us back our quality of life and the American way.

Dec 16, 2013 9:25AM
It's almost like a dark cloud is forming over the USA...and we're getting further and further away from everything we once valued as being an American ..And  being replaced with loony progressive liberal ideology,which is an attack on American values,in almost everything.  ..our social values,our traditions,Christianity,marriage,and now our economic balance is being transformed so for us to work hard to prosper and to better ourselves..will become more and more difficult....America as a country is losing ground fast,right before our eyes, and is changing it's values to something that is NOT American.
Dec 8, 2013 9:10AM
You can't claim your medical cost or your donation to charity unless it meets a certain amount.  Better check your facts before making that statement.  I didn't have enough medical to qualify for the deductions.
Dec 8, 2013 11:16PM

I just want to quit - live off the Gov't, and be at peace.  Really, I've paid so much into the Gov't and can hardly believe truly how much I have paid in taxe;, that I could retire on the amount of taxes I paid over my entire life.  so, why not?  I will stop giving to charities, stop purchasing product from those who win my business, and instead live off the monies I can get from Gov't support and "relax" the rest of my life - cool man! really cool!

Dec 3, 2013 6:43PM
Dec 16, 2013 7:10AM
I wonder if I can deduct for Affluenza?
Dec 16, 2013 11:26AM
I used to have 32 employed people under George Bush and even carried health Insurance with a low deductable. Now we have hope and change. I have 0 employees now am 65 years old still working , lost my retirement and HOPE i can survive working 60 hrs a week, also my darling wife working 7 days a week so we can pay our property tax so we do not loose our home that is over taxed and you can not sell for half the evaluation. IS not the CHANGE just wonderful.  I look back at all the men and women that have gave  their lives in keeping America free and being proud to be a American. We the people should be ashamed for allowing this to happen to a once great country. Ike/ Roosevelt /Kennedy / and yes G W BUSH  had tough decisions to make, this administration has done more to cripple this country than all of our wars put together.  People We are at the edge of the cliff If we want our grand children to survive we need to make a move now .we dont have 3 more years.
Dec 8, 2013 2:48PM
 No No I have the solution............. You have two choices become a welfare democrat voter or a government employee democrat voter! Come on join the party of leeches scum freaks losers thief's socialist Communists Nazis homos dykes criminals whores sluts morons imbeciles "community organizers" Pill takers pill sellers over paid part time teachers who dish out drugs, collect welfare and deal drugs no English necessary.......The land of Opportunity of Utopia for all you drooling masses of losers this is your party the DEMOCRATS.
Dec 9, 2013 12:30AM
Dec 16, 2013 9:02AM
At least  Bush served in the military trying to protect us instead of feading off us. The latest report says more people were added to the top 10% of income in Washington DC than any place else. And what have they produced. Take from the rich and give to the poor and keep their comission maybe 10% all the time while professing to help the people. Get smart people.....
Dec 8, 2013 7:29AM
Many years ago I received stock in a demutualization.  This year I gave some to a charity instead of the usual cash.  Much like #2 in the list.  The stock has tripled over a decade plus a 2/1 split and good dividend.  My cost basis is zero and the stock is a full write off at $93 a share.  A great way to give if anyone is in a similar situation.
Dec 16, 2013 10:54AM
I get a kick out of all the comments about how you feel short changed by Obama.  What were you all thinking when you voted him in the first time?  Then to further prove that your not that bright you did it again.  Now you feel betrayed now you don't trust him!!!!  Can't blame me registered Republican here......Little history lesson....Who was the first Republican President? ....Give up....Abraham Lincoln.  See all you Demarats think only you have forward thinking ideas.  Your the same fools that will be backing Hilary or Lizzie get what you deserve.  I don't!!!
Dec 3, 2013 5:52PM
Oh, crap, there goes my vacation to the Bahamas!!!  And, it was going to be a business trip too;<)  This lifestyle is so "taxing"!!!
Dec 16, 2013 9:31AM

I thought most people that read msn didn't pay income taxes, based on the fact most are Democrats and are living off the system.


That is what make life fun, "Learning something new everyday".

Dec 16, 2013 8:42AM
barack hussein will get rid of all those deductions, that way he will have more money to give to those "poor" people.
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