As the year comes to a close, our thoughts turn to — taxes? You mean, with everything else there is to do, we need to think about taxes too? Yes, if you plan to take advantage of some of the tax provisions for which the curtain goes down at midnight on December 31, here are a few of the expiring tax provisions, and some ideas about what you should do now.
Optional state and local sales tax deduction. If you itemize your deductions, 2013 is the last year you can choose to deduct the sales taxes you paid during the year instead of state income taxes. This provision has been a boon for residents of states with no state income tax, such as Washington and Texas.
It also benefits people who have paid relatively little in state income taxes but who have spent a great deal on sales taxes during the year. If you bought a new car during the year or something else really expensive such as a boat, your sales tax deduction may be much greater than your state income tax deduction. If you are considering buying a new car soon, you might save taxes by seeing your car dealer for a test drive now. If you strike a deal, you can welcome in the new year with new wheels and a big fat sales tax deduction.
Tuition and fees deduction. If your income is less than $65,000 ($130,000 on a joint return) you can deduct up to $4,000 of tuition and school-related expenses, even if you don’t itemize your deductions. If your income is higher but less than $80,000 ($160,000 on a joint return), you can deduct up to $2,000. But 2013 is the last year for the deduction, so if you are a student and your tuition and school expenses that you’ve paid in 2013 are less than the deductible amount for the year, consider prepaying next semester’s tuition before the end of the year to maximize the deduction. If you wait until next year to pay the tuition, you will miss out.
School teacher supplies. School teachers who ante up for books, supplies, computer equipment and other materials to use in their classrooms are able to claim a deduction for up to $250 with the Educator Expense Deduction, even if they don’t itemize deductions on their tax returns. Unless this deduction is extended by Congress, it is set to expire at the end of 2013. So if you are a school teacher and haven’t yet reached that $250 limit, take advantage of holiday sales prices to stock up on supplies you need for your classroom.
Check back for more tax deductions and credits set to expire this year so you can make some smart tax savings moves before the end of the year.