So how much will you owe with your 2013 federal income tax return? Not sure? You still have time to calculate your liability — and perhaps reduce it. Here are planning ideas to consider in the final months of the year.
Check your income
Your tax rate is based on your “bracket,” which is a range of income. For example, when you’re single and your 2013 taxable income is between $8,926 and $36,250, you’re in the 15% bracket. Additional income, up to $87,850, will be taxed at the next rate, which is 25%.
- Consider ways to keep your income within a lower bracket as you approach the next level. One example: Increase pre-tax retirement plan contributions. For 2013, the 401(k) contribution limit is $17,500. When you’re age 50 and over, you can also make an additional catch-up contribution of $5,500.
- Consider selling real or personal property on an installment basis. Electing to receive part of the proceeds in future years allows you to defer the income and the related tax.
Estimating your taxable income before year-end opens up opportunities for effective planning. Give us a call. We’ll help you choose strategies that will give you the most benefit.