Regardless of your opinion about taxes, we can all agree that nobody should overpay their taxes. Here are six sound ideas that you may want to consider this month that may provide some tax savings to your household.
Pay Bills Ahead of Time
If you itemize, paying some bills early may minimize your deductions. For example, if you pay your January 2014 mortgage payment and your 2014 property taxes in December 2013, you can itemize those. If you are a joint filer and don’t have $12,200 in qualifying expenses ($6100 for single filers) to make itemizing deductions worthwhile, don’t prepay your expenses. Save your payments until 2014 when you may be able to take those deductions. The IRS has an Alternative Minimum Tax (AMT) Assistant Calculator to test if you are subject to AMT.
Make Home Energy-Efficiency Improvements
There are Federal Tax Credits for home energy-efficiency upgrades to your home that you may take advantage of before December 31st. These include improvements to your heating and ventilation or Air Conditioning systems, home insulation, Roofs, Water heaters, Windows and doors. The tax credit is 10% of the cost up to $500 or a specific amount from $50 to $300. Solar Energy systems allow for a 30% tax credit with no upper limit.
Recycle When You Remodel
It may be too late for this one this year, but keep this tax saving tip in mind. When you remodel, do it in a way that keeps intact the fixtures and house parts that you remove including cabinets, bathtubs, wood floors, windows and doors. Donate them to a salvage store like Habitat for Humanity’s Restore to earn a tax deduction. If you happen to be cleaning out your closets this winter, be sure t
o donate those to a local charity too.
Spend FSA Funds on Home Improvements
If you set up a Flexible Spending Account (FSA), you can spend any leftover allocation to make medically necessary home improvements like a handrail in your bathroom, or replacement air filters for your HVAC. Get a letter from your doctor supporting your medical need for the improvements. Many employers have adopted grace periods giving you until March 15th, 2014 to spend your FSA funds.
Deduct Property Taxes Paid At Closing
If you purchased your home in 2013, check you HUD-! settlement statement (Lines 106 and 107) to see if you reimbursed the sellers for property taxes they paid. You won’t get a 1098 from your lender showing those taxes because you paid them at settlement not from your escrow account.
Home Office Deduction
If you have a home office, but haven’t taken the home office deduction because it’s too complicated or you’re worried it would cause you to be audited, go ahead and take it on your 2013 taxes. Starting this year, you can take a new Home office standard deduction of $5 per square foot up to 300 square feet if you itemize deductions. You won’t have a home depreciation deduction or later recapture of depreciation for the years you use this simplified option.