There are several tax cuts that are set to expire at the end of the year. While it is not yet known whether they will be extended into tax year 2014 (and it may be months before we know for sure), now is the time to assume their demise and take advantage of them this year. Among them:
- Charitable giving: Seniors age 70 1/2 and older who are subject to an annual required minimum distribution from their IRA accounts can have the money paid (up to $100,000) directly to a qualified charity of their choice. This is a beneficial tax move for those who are concerned that their retirement income will be high enough to trigger the Social Security benefits tax. But the money must be paid directly to the charity (see IRS rules). This benefit may be not available for tax year 2014.
- Private mortgage insurance: If you are paying for private mortgage insurance (PMI) on your home (required for homebuyers with less than 20% equity in their home), you can deduct those payments from your taxable income. This provision is set to expire the end of 2013, unless, of course, it is renewed by Congress. See IRS rules.
- Sales taxes: If you live in a state with no state income tax, this may be the last year you can deduct your state’s sales tax. If you’re waivering about whether to purchase that new car this year or next, this year may be the time to do it. See IRS rules.
- Mortgage debt: If your lender canceled, forgave or restructured a debt for you in 2013, the income you saved from the discharge of that debt, up to $2 million, is not taxable this year. But things will change in 2014, unless Congress extends this provision. See IRS rules.
Wishing all of you a very happy, low-tax, holiday season!