There’s time left in 2013 to find tax savings

Year-end Tax Planning for 2013

There is some time left to make some income tax savings moves for 2013.

Charitable Contributions.

Make deductible charitable contributions on or before Dec. 31. You must Taxpayers must be itemizing deductions on IRS Schedule A in order to benefit. Be sure to obtain acknowledgment letters for donations greater than $250. Cancelled checks are insufficient to support a deduction for a gift greater than $250.

Energy Credits

Homeowners still have some time to make energy saving home improvements. The Nonbusiness Energy Property Credit is available to homeowners who install energy efficient improvements such as insulation, new windows or furnaces. The 2013 credit rate is 10 percent of the cost of qualified energy efficiency improvements and has a lifetime limit of $500. The Residential Energy Efficient Property Credit is for alternative energy equipment. The credit is 30 percent of the amount spent on qualifying property such as solar electric systems or solar hot water heaters.

Tax-favored Education Savings

If you're eligible, for 2013 you can contribute up to $2,000 to a Coverdell account on behalf of a child. Contributions grow tax-free and qualified K-12 and higher-education-related withdrawals are tax-free. You have until next April 15 to contribute for income-tax purposes, but if you make the contribution by December 31, it will count as a gift for this year instead of next year for gift-tax purposes.

Anyone, regardless of income, can contribute up to $70,000 ($140,000 for a married couple) in 2013, to a 529 plan without incurring gift taxes, if you elect to have the gift treated as though it were made over five years. You don't have to invest in your own state's plan, and it's a good idea to compare state plans - especially if you live in a state with no deduction (such as California) or one with no state income tax.

Capital Gains and Losses

If you have capital gains in your stock portfolio, consider recognizing losses to offset them. It is generally a good idea to pair losses with gains. Total capital losses offset capital gains. Up to $3,000 in capital loss can be deducted against ordinary income. Unused loses can be carried forward and used in subsequent years.

Contribute to a Retirement Account

For 2013, the maximum IRA contribution is $5,500 ($6,500 if age 50 or over). The maximum contribution for a retirement plan such as a 401 (k) is $17,500 ($23,000 if age 50 or older).

If you're self-employed, consider a small business retirement account such as a SEP-IRA, SIMPLE IRA, Individual 401 (k) or other qualified retirement plan. Contributions are tax-deductible and grow tax-deferred. If you open a qualified retirement account by December 31, you have until the day you file next year, including extensions, to make this year's contribution.

Retirement Savings Contribution Credit or "Saver's Credit."

This tax credit may be worth up to $2,000. It is available to eligible taxpayers who contribute to a retirement plan and whose income is generally less than $59,000.

Qualified Charitable Distribution from your IRA

This benefit expires at the end of 2013. It allows individuals age 70½ or over to contribute up to $100,000 directly to a qualified charity and exclude it from income. The excluded amount can satisfy the required minimum distributions for the owner and can keep taxpayers from losing the benefit of deductions and other tax benefits by keeping gross income lower.

Flexible Spending Accounts

Flexible spending accounts, also called flex plans, are fringe benefits which many companies offer that let employees put of their pay into a special account which can then be used to pay child care or medical bills. The advantage is that money that goes into the account avoids both income tax and Social Security taxes. The catch is the "use it or lose it" rule. If you don't use everything in the plan by the end of the year, you forfeit the excess.

Check to see if your employer has adopted a grace period permitted by the IRS, allowing employees to spend 2013 set-aside money as late as March 15, 2014. If not, make a last-minute trip to the drug store, dentist or optometrist to use up the funds in your account.

State and Local Taxes

Paying any state and local tax you expect to owe for 2013 before the end of 2013 will allow you to deduct those payments on your 2013 federal income tax return.

Gift Giving

The 2013 annual exclusion from the gift tax is $14,000. Taxpayers can give gifts up to $14,000 per donee without having to file a gift tax return and without using any of their lifetime exemption from estate and gift tax. Gifts are not income to the recipient and are not deductible to the donors.