Now that the holiday season has arrived, you might decide to step up your charitable donations to boost your deductions for 2013. Here are six timely strategies.

1. Audit-proof your claims. The IRS imposes strict substantiation rules for charitable donations. In fact, you’re required to keep records for all monetary contributions, no matter how small. The best approach is to obtain written documentation for every donation.

2. Charge it. The deductible amount for 2013 includes charitable gifts charged by credit card before the end of the year. This covers online contributions using a credit card account. So you can claim a current deduction for donations made as late as December 31.

3. Give away appreciated stock. Generally, you can deduct the fair market value (FMV) of capital gain property owned longer than one year. For instance, if you acquired stock ten years ago for $1,000 and it’s now worth $5,000, you can deduct the full $5,000. The appreciation in value isn’t taxed.

4. Sell depreciated stock. Conversely, it usually doesn’t make sense to donate stock that has declined in value, because you won’t receive any tax benefit for the loss. Instead, you might sell the stock and donate the proceeds. This entitles you to a capital loss on your 2013 return plus the charitable deduction.

5. Clean out the storage space. The tax law permits you to deduct charitable gifts of used clothing and household goods that are still in “good used condition or better.” Don’t be so quick to discard items that can be donated to charity.

6. Donate a car. The deduction for a donated vehicle valued above $500 is generally limited to its resale amount. However, if the charity uses the vehicle for its tax-exempt purposes, you may be able to deduct its fair market value.

Call us for more details on the tax rules governing charitable contributions.

There’s not much time left for you to make beneficial tax moves for 2013. Consider these possibilities.

* Maximize retirement plan contributions. For 2013, you can put $17,500 in a 401(k) plan, $12,000 in a SIMPLE, or $5,500 in an IRA. If you’re 50 or older, you can set aside even more as “catch-up” contributions.

* Decide whether to sell investments to offset gains or losses already taken this year. You can deduct $3,000 of net losses against ordinary income.

* Estimate your tax liability for 2013, taking the new Medicare tax increases for higher-income taxpayers into account. If you’ll be underpaid, adjust your final quarterly tax payment or your December withholding.

* December 31 is the deadline for taking a 2013 required minimum distribution from your traditional IRA if you’re 70½ or older. Miss this requirement and a 50% penalty could apply.

* Purchase needed business equipment to use the first-year $500,000 expensing option for new and used equipment and 50% bonus depreciation for new equipment.

* Make energy-saving home improvements that could qualify for a lifetime tax credit of up to $500.

* Finalize annual gifts to use the 2013 exclusion from gift tax on gifts of up to $14,000 per recipient.

Contact our office for details on these and other year-end tax moves.

Some tax-cutting strategies make good financial sense. Other tax strategies are simply bad ideas, often because tax considerations are allowed to override basic economics.

Here’s one example of the tax tail wagging the economic dog. Let’s say that you run an unincorporated consulting business. You want some additional tax write-offs, so you decide to buy $10,000 of office furniture that you don’t really need. If you’re in the 28% tax bracket and you deduct the entire cost, this purchase will trim your tax bill by $2,800 (28% of $10,000). But even after the tax break, you’ll still be out of pocket $7,200 ($10,000 minus $2,800) – and stuck with furniture that you don’t really need.

There are other situations in which people often focus on tax considerations and ignore the bigger financial picture. For example:

* Someone increases the size of a home mortgage, solely to get a larger tax deduction for mortgage interest.

* A homeowner hesitates to pay off a mortgage, just to keep the interest deduction.

* Someone turns down extra income, because it might “push them into a higher tax bracket.”

* An investor holds an appreciated asset indefinitely, solely to avoid paying the capital gains tax.

Tax-cutting strategies are usually part of a bigger financial picture. If you are planning any tax-related moves, we can help make sure that everything stays in focus. For assistance, give us a call.

Are you familiar with PEP and Pease? Though they sound like a pop duo, the terms refer to tax rules known as phase-outs that can impact how much federal income tax you owe.

Phase-outs are reductions in the amount of deductions, credits, and other breaks you can claim on your tax return. Though generally based on adjusted gross income, phase-outs vary in rate, amount, and how they’re calculated.

Here’s an overview of PEP and Pease, two tax breaks that are once again subject to phase-out this year.

* Personal exemption phase-out (PEP). If you’re married filing jointly for 2013 and your income exceeds $300,000, the PEP will reduce the amount you claim for yourself, your spouse, and your dependents.

The personal exemption for 2013 is $3,900. But when PEP applies and your income increases, your deduction is reduced accordingly.

* Itemized deduction phase-out. You probably already know that some itemized deductions are limited. For instance, to claim a deduction for medical expenses, your out-of-pocket costs for this year have to exceed 10% of adjusted gross income (AGI). This threshold remains at 7.5% of AGI if you are 65 or older. Miscellaneous itemized deductions, such as unreimbursed employee business expenses, are limited to amounts over 2% of AGI.

* There’s also an additional phase-out called the Pease provision that limits the amount of total itemized deductions – after the above reductions. For 2013, Pease kicks in when your income exceeds $300,000 ($150,000 if you’re married filing separately).

Other phase-outs limit the amount and deductibility of IRA contributions; the education, adoption, and childcare credits; and the alternative minimum tax exemption. Please call for a review of how phase-outs affect you and what you might be able to do to avoid them.

As the population in the U.S. continues to age, more and more people will find themselves caring for their parents. Here are some of the tax breaks that caregivers should consider.

* If you provide more than half of your parent’s support, you may be able to claim your parent as a dependent on your tax return. To be eligible, your parent can’t earn more than $3,900 in 2013, excluding their nontaxable social security and disability income.

* What if you and your siblings all pitch in to support a parent? Anyone who contributes at least 10% of the total support can be the one to claim the $3,900 exemption if all of you sign a multiple support agreement.

* Even if a parent’s income exceeds $3,900 this year, you can still deduct the medical expenses paid on the parent’s behalf, as long as you provide more than half of his or her support.

* If you hire someone to take care of your parent while you work, you might qualify for the dependent care tax credit. Your parent must be physically or mentally incapable of caring for himself.

* Unmarried individuals who support a parent can file their tax returns as “head of household.” To qualify, your parent doesn’t need to live with you. Instead, as long as you pay more than half of the cost of maintaining your parent’s main home, including a rest home or nursing facility, you qualify for this preferential tax treatment.

For more information about the tax issues affecting caregivers and their parents, please give us a call.

The Internal Revenue Service has announced a delay of approximately one to two weeks to the start of the 2014 filing season due to the 16-day federal government shutdown.

The government closure came during the peak period for preparing IRS systems for the 2014 filing season. Updating these core systems is a complex, year-round process with the majority of the work beginning in the fall of each year.

There are additional training, programming, and testing demands on the IRS this year as the agency works to prevent refund fraud and identity theft.

The IRS is exploring options to shorten the delay and will announce a final decision on the start of the 2014 filing season in December.