Monday, December 23, 2013

Last Minute Year End Tax Moves - Timing Opportunities

As 2013 comes to a close quickly, what can you still do to reduce your taxes for 2013?

Does your income fluctuate from year-to-year?  Perhaps you expect changes to income tax rates or income taxes or whatever the government wants to disguise them as.  In some cases you can benefit by timing your income or losses so you take less income in a year when your effective tax rate will be higher and defer the income until the following year when your tax rate will be lower.  The same rational applies to cash flow issues.  These are timing opportunities to minimize your taxes in a particular year.

Types of opportunities to defer income and taxes:

  • Capital Gains
  • Salary from your business
  • Income in your business
  • Purchasing Capital Assets
  • Taking a Retirement Distribution
  • Paying Bills in your Business
  • Paying Real Estate Property Taxes
  • Making Charitable Contributions

Here is a tip for business owners; a cash basis business can accelerate bill payments into 2013 without coming out of pocket with the cash until 2014.  This can be done by paying bills using a credit card.  The IRS allows you to take the deduction in the year the expense or asset is charged on the card.  If you use this to purchase a capital asset realize you have to actually put the asset in service in 2013 to take the deduction in 2013.  This strategy can help reduce your taxes even if your cash situation hinders you from paying for it now.  

Disclaimer: Every time I offer this tip someone yells "it is a bad idea to promote the use of credit cards."  I am sure if you have a business you are mature enough to work through that potential landmine.

Recognize that these strategies merely shift income and taxes between years and sooner or later you will pay tax on your profits and paying taxes on profits and income is a good thing because you are making money. Perhaps it is a good thing to delay paying some of the tax until next year.

These timing issues require knowledge of tax changes and changes in your personal situation.  Regular discussions with you CPA about your situation can help you take advantage of these opportunities.  I would also be happy to discuss different tax strategies with you as your CPA.  Feel free to use my information below to contact me.

Jeff Haywood, CPA
The CPA Superhero
The above information is general information and is not all inclusive and as always in your tax situation everything "depends on facts and circumstances."  So call me to talk about your specific facts and circumstances.