Don't pay Uncle Sam more than you have to! Tax day will be here before you know it, so take advantage of these tips before the end of the year to make April 15th a little easier to handle.
Tip 1: Be careful when buying a new mutual fund.
Most mutual funds pay out capital gains and dividend toward the end of the year. It's important to check for potential distributions before you buy a new fund to avoid a possible tax bill. The IRS doesn’t care how long you’ve a fund so you’ll be taxed even if you buy it just before the distribution. And since the share prices of funds and stocks drop by the amount they distribute, missing the dividend won’t affect your future return.
Tip 2: Prepay your property taxes.
Property tax payments aren’t due until the end of January, but you can deduct them this year if you pay them by the end of 2013. However, if you expect to be in a higher tax bracket next year, then it might make sense to wait until January to pay your 2013 property taxes and then prepay next year’s taxes by the end of 2014 in order to double your deduction in a single year.
Tip 3: Pay your January mortgage payment before December 31st.
Paying your January mortgage payment before the end of the year will increase your 2013 mortgage interest deduction by the extra amount of interest you pay in the January payment. This might not be a large deduction depending on your mortgage interest rate and outstanding loan balance, but every deduction counts!
Tip 4: Review your portfolio.
If you have investments in taxable accounts that are worth less than you paid for them, it might make sense to sell them by the end of the year to realize the loss. These losses can be written off against investment gains, and excess losses can be written off against income up to $3,000 then carried over to future years.
Tip 5: Defer income.
If you have your own business and use the cash method of accounting, you might be able to benefit from waiting until the end of the year to invoice customers so you don’t receive the income
– and have to pay taxes on it – until 2014.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
