Clear64° WeatherClear64° Weather

Tax tips for 2013

For most Americans, the current tax filing season will be business as usual, with few changes to the ground rules of recent years. For the very affluent, it may bring sticker shock.

Tax lawyer Barbara Weltman is among the tax experts who cited both opportunities and traps for the current filing season, and who offered some tips for getting personal finances in shape for long-term tax efficiency:

Simpler home-office math

The Small Business Administration says 52 percent of businesses are home-based, but Weltman said, many people who qualify fail to take a home-office deduction. In the past, that may have been because the paperwork was too daunting. Now there is an easy alternative: simply deduct $5 a square foot for a home office, up to a maximum of $1,500.To qualify, a home office must be necessary for a business, and must be used regularly and exclusively for it. But the office does not need to be a separate room, or even partitioned off, Weltman said, so long as it is a clearly defined space. There must be enough income to offset the deduction; the difference cannot be carried forward to future years.

Harvesting losses

Krause notes that many investors hate to sell any holding at a loss, hoping that it will bounce back in price. But capital losses offset capital gains dollar for dollar, so if you are going to recognize a gain, look for an offsetting loss to sell, he said. If you like the investment, you can replace it after 31 days or look for a similar holding now.

Strategies for giving

If you'd like to give money to someone, there are no tax consequences for individual gifts of up to $14,000 a recipient, or up to $28,000 if members of a couple give individually to a recipient, because each spouse is counted separately.

Saving for education

Larry Krause, president of an independent wealth advisory firm, is enthusiastic about qualified tuition programs, often called Section 529 plans. These plans are operated by states or educational institutions and offer a wide range of investments. The account owners — typically parents, grandparents or other relatives — retain control over the money. The beneficiary is the prospective student, and, what's more, the beneficiary can be changed. The money put into the account is not deductible at the federal level, but the account's growth is tax-deferred. Money paid out of it for qualified education expenses is exempt from federal taxes.

How the rich are hit

The American Taxpayer Relief Act sets a top federal income tax bracket of 39.6 percent for single filers with taxable income above $400,000 and for couples filing jointly with taxable income above $450,000, and it raises their rate on qualifying dividends and long-term capital gains to 20 percent from 15 percent.

In addition, the act limits itemized deductions and personal exemptions. Increases related to health care are a surcharge of 0.9 percent on wages and self-employment income above $200,000 for single filers and above $250,000 for joint filers, and a surcharge of 3.8 percent on net investment income for people whose adjusted gross incomes top the $200,000 and $250,000 thresholds.

Medical deduction whittled

Previously, taxpayers who itemized deductions and had high unreimbursed medical and dental costs could deduct them if they exceeded 7.5 percent of adjusted gross income. But last year, the threshold was raised to 10 percent for people younger than 65.

A free calculator

One way to get a handle on what you're likely to owe in April is to use the free and simple Total Tax Insights calculator, offered by the American Institute of Certified Public Accountants at totaltaxinsights.org. It tells users much more than their projected income-tax bills: By clicking on your state and filling out a form, you can gauge the impact of more than 20 federal, state and local taxes.

In fringe benefits, audit flags

Richard C. Farley Jr. of PricewaterhouseCoopers listed what his firm sees as the top five fringe benefits that auditors often found taxable to the people claiming them: company aircraft use for personal travel, spousal accompaniment on business trips, travel away from home for work, trips awarded for attaining performance goals and company-provided cellphones and tablet devices.

Tax tips for 2013 02/21/14 [Last modified: Sunday, February 23, 2014 5:58pm]

© 2014 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...