Year End Tax Planning Tips-2013

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As you go about making your Black Friday shopping list for all the good & naughty little angels in your life, don't forget to look at your finances as well. You might have re-assessed your withholdings & even explored tax-loss harvesting. Going into 2014, there are deductions that will not be extended and there will be steps you need to take to make the best use of them for the 2013 tax year.

Sales Tax Deduction on "Big Ticket Items":  If you are going to elect to claim the sales tax deduction vs the state tax deduction on your Schedule A or if you live in a state that doesn't have taxes, this is the year to accelerate your "big ticket" purchase, this election will not be available after 2013.

Energy Efficient Home Improvements: If you are a homeowner and have not availed the full extent of the energy efficient home improvements deduction, which is $500, it's time to put in any required energy efficient home improvements, such as, insulation/ installing energy-efficient windows/ heater or air conditioner before 2014. 

Tuition & Fees Deduction:  The above-the-line tuition & fees deduction is up for Congressional approval and unless it is extended, consider prepaying eligible tuition
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expenses, if this will increase your deduction. Generally, this deduction is allowed for enrollment at an institution of higher education during 2013/ for an academic period beginning in 2013/ in the first 3 months of 2014. 

Flexible Spending Account:  Increase the amount set aside for next year in your employer's health flexible spending account (FSA) if there was very little set aside for this year. 

Health Savings Account: If you become eligible to make health savings account (HSA) contributions in December of this year, a full year's worth of deductible contributions can be made for 2013. 

Defer Bonus: If getting a bonus at the end of the year will push you into the next tax bracket for 2013, you can arrange with your employer to defer your bonus. 

Purchase of Qualified Small Business Stock (QSBS):  Purchase QSBS before the end of this year. There is no tax on gain from sale of QSBS if, 

  • It was purchased after September 27th, 2010 & before January 1st, 2014, and 
  • Held for more than 5 years.
These sales will not cause AMT preference problems. To qualify for this break, the stock must be issued by a C Corporation with total gross assets of $50 million or less, and a number of other technical requirements are to be met. 

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Required Minimum Distributions:  If turning 70-1/2 in 2013, one is required to take minimum distributions or pay a penalty of 50% of the RMD as excise tax. (See more in my post here) The first RMD can be delayed into 2014 if turning 70-1/2 in 2013. If one is not going to continue to work as well in 2013, this would be a good strategy, as the overall income will be lower or will remain the same in 2014. If not, this will result in a higher taxable income for 2014. 

Gifts Before the End Of the Year:  You can give up to $14,000 to each of unlimited number of individuals and save on gift taxes. Read more on Gifts in my post here

Traditional IRA Conversions to Roth: If you expect to be in a higher income tax bracket well in to your 60's & 70's, converting your assets in a Traditional IRA to a Roth IRA would be a good tax strategy. The conversion will result in a higher income tax bracket for the current year, however, Roth IRAs are not subject to RMD and can be passed on to future generations. 

Mortgage Insurance Premiums: For years 2007 to 2013, taxpayers can treat insurance premiums on mortgage as qualified residence interest. Not so after 2013, so if you are due a re-fi on your mortgage and can get a better rate of interest or can stop paying mortgage insurance premiums, this would be a good time to explore that.

Tax-free Distributions from Individual Retirement Plans for Charity: A qualified charitable distribution (QCD) from a individual's IRA is excluded from his/ her gross income. To qualify for this, certain conditions have to be met and the total QCD for the year cannot be more than $100,000. Taking advantage of a QCD from an IRA has various advantages for higher income seniors who are drawing on Social Security & have income from other sources. This option is not available after 2013. 

Bibliography: Parker Tax Pro Library; Year End Planning Resources From Thomson Reuters; 

Please read my disclaimer here. For more questions regarding this and other matters, I can be contacted at     


  1. My tax students found your advice here is a sensible compliment to the technical tax knowledge found from looking over the free sample EA exam questions at When expiring tax provisions alter future details, an advantage of being an Enrolled Agent like you is that required continuing education delivers updates about the latest facts.

    1. I am so glad your students found this useful, Brian. Appreciate your feedback!

  2. Rather than letting receipts and financial paperwork build throughout the year, set aside time to tackle financial recordkeeping tasks on a weekly or monthly basis. Label and file expense receipts properly to ensure they're classified correctly for tax purposes.

    Victory Tax Solutions


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