BOCA RATON, Fla.--(BUSINESS WIRE)--Before you get swept up in the season, take a few minutes to talk with your financial advisor to see if you might be able to give yourself a nice holiday present. Taking the time for some year-end tax planning could make a big difference in your 2013 income tax return. Here are some suggestions to consider as you review your personal financial situation.
First of all, the tax rate has gone up for high-income individuals and couples. If your taxable income exceeds $400,000 in 2013 (or $450,000 if you are married and filing jointly), the new rate is 39.6 percent. So, if you are approaching that threshold, see if you can postpone some income – such as a holiday bonus – until January. Another traditional strategy is to try to pay as many expenses as possible before December 31. That could even mean paying an upcoming medical bill in advance.
Those two steps – delaying expenses and paying your bills – may make sense even if your taxable income won't come close to the $400,000 threshold. As the result of another change in the tax code, your personal and dependency exemptions may be phased out this year if your adjusted gross income is higher than $250,000 ($300,000 if married and filing jointly). If you plan to itemize deductions, you should definitely consult with your advisor soon, because those deductions might also be limited.
There are other changes that will be coming in 2014. For example, this will be the last year you can deduct state and local sales tax if you itemize your deductions. So, if you've been considering a major purchase (such as a car or boat) that requires you to pay sales tax, you might be better off to complete the sale by year-end, rather than wait until January.
One last suggestion: be sure that you contribute as much as possible to your company's 401(k) plan or any other tax-deferred retirement saving program, such as a SEP-IRA for self-employed professionals. Since every dollar that you contribute reduces your adjusted gross income for 2013, that's an immediate tax savings. Since everyone's financial situation is different, you should talk with your tax advisor about potential steps you can take. But remember that you may be able to gain some real benefits by taking action before the end of 2013.
A nationally recognized wealth manager and financial advisor, David Katz AAMS® AIF® is a regional director at Gitterman & Associates Wealth Management, LLC in Boca Raton, FL. He has extensive experience in developing investment and risk management strategies for doctors, dentists, professors and other professionals and their families.
Securities Offered through Triad Advisors Inc. Member FINRA/SIPC Investment Advisory Services offered through Gitterman & Associates Wealth Management, LLC., a Registered Investment Advisor which is not affiliated with Triad Advisors Inc.