Decorations in every store aisle aren’t just a sign of the end-of-the-year holiday season — they’re a harbinger of the upcoming tax season. Before the year is over, take the time to think through your tax planning strategy. Consider these five ways to take advantage of tax breaks, before those New Year’s celebrations close the door on 2013 write-offs.
Considering a charitable donation? Instead of giving cash, donate a share of stock or a mutual fund. If you have held the stock or fund share for more than a year, you will avoid paying tax on the appreciation, but will be able to deduct the full value of the donation, according to a news report from Thomson-Reuters.
Keep the paperwork. Charitable contributions are only deductible if you have the proper paperwork. If you donated less than $250, you must keep a bank record, cancelled check or credit card receipt. If it was a cash donation, get a written receipt from the charity.
Give your kid a job. Are you self-employed? You can avoid paying social security and unemployment tax by giving your kid (age 17 or younger) a job, which may defer some of your income into a presumably lower tax bracket. Most children are usually exempt from paying income tax. Just remember to keep it reasonable! Most 15-year-olds aren’t worthy of a six-figure salary!
Don’t miss potential tax breaks. Before the year is out, make sure you’ve taken advantage of every tax break you can – including energy-saving home improvements, deductions for a home office and other easy-to-miss deductions. These may include items such as tuition or childcare costs, moving expenses, and retirement contributions.
Digitize your paperwork. Having all of your receipts and other pertinent paperwork digitized will make tax preparation so much easier!