2013 Year End Tax Planning Ideas

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We are now accepting appointments for the year-end tax planning.  October and November are great months to get your financial books in order and plan for the year-end tax.  We would like to see you in our office to discuss your unique needs.  While you set up that appointment consider some of these ideas:

Charitable gifts of appreciated property

The tax advisers suggest the taxpayers that they can donate to charitable organizations through stocks, bonds, exchange-traded funds and mutual funds instead of donating through cash. Donating through these appreciating financial instruments can attract tax deductions.

Tax-deferred vs. Taxable investments

It requires some prudence to classify the investments intelligently so as to save tax. High income-producing assets like stocks and other high dividend-paying financial instruments should be classified in the deferred tax accounts, so that tax can be paid only when income arises from it. If these are classified in the category of the taxable account, then taxes paid on these would have to be frequent. The intelligent classification of products can help to save reasonable amounts of taxes. It is the duty of the tax adviser to suggest these classifications to his client.

Fund Roth IRAs for working teens and twenty-somethings

Fund Roth IRAs are an excellent option for the younger generation and working teenagers. Usually the young are very interested to put in their hard-earned money in tax savings schemes so that they can save for college education, buying property or even to maximize retirement benefits. Roth IRAs are an option where the working younger generation invests after-tax funds.

The young generation is eligible for a lower tax bracket and hence pays limited tax and invests in these accounts. When the fund reaches its maturity or when the individual attains full retirement age, the benefits of the Roth IRA can be withdrawn free of any income taxes.

Loan money to kids for college or home purposes

The usual practice of the kids is to get a student loan for higher education if their parents’ income level is too high to qualify for financial aid. However, these do not qualify for any tax deductions. Instead, the other way to get a tax deduction is for the parent to give a family loan to the kid for higher education. To claim tax deductions on these family loans, the paperwork is very important. It should be in writing and the interest rates should be similar to what the bank rates are and upon good performance through grades, the parents can write off a part of the loan in the future.

Converting IRA into a Roth IRA

Some of the employers give their employees an option to convert their Individual Retirement accounts into Roth Accounts as the latter helps to withdraw the retirement benefits at a future date without any tax charges. The Roth IRA is very helpful for the younger generation as they need to pay only a minimal amount of tax while investing in these accounts.


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