Most individuals are well aware of making charitable contributions at year end to increase the amount of itemized deductions they will be able to claim. Below we have listed other maybe not as well-known deductible items that might have been overlooked.
Prepay the following expenses:
- January’s mortgage payment
- Pay fourth quarter state taxes in December (for those not subject to AMT)
- Prepay property taxes
- Prepay winter term college tuition (as long as it is for courses starting during the first three months of the New Year and you have not already reached the maximum amount for the year)
Make an initial or additional contribution to the following:
- Contribution to an IRA(can be done until April 15th, 2014)
- If you are funding a 529 plan make a contribution to reduce taxable income on your state return. (Could be allowed up to April 15th, 2014 – check your state law)
If you have already reached the 7.5% (over 65 years old) or 10% (everyone else) medical deduction threshold, see if you have any bills due in the New Year that could be paid before year end to increase your medical deduction in a year when you might actually get one!
For those who have stocks that they are contemplating selling, make sure that you look at the timing of the sale and when would be the opportune time to do so. Selling stocks at a loss this year could reduce this year’s tax liability but if you are planning to sell stock in the next year with a gain it may be better to wait and sell then.