There are a bunch of important tax breaks that are set to expire at the end of 2013. This means that you still have a few weeks left to take advantage of them.
Okay, yes, Congress could get together and decide to extend these breaks (a few of them get renewed every January) for another year but...politics aside, if you've been watching the news lately you'll know that getting anything through Congress is something of a pipe dream. It is gridlock-a-go-go in there.
Of the tax benefits that are set to expire at the end of this year, here are the five that you are most likely going to be able to use to your advantage:
Mortgage Insurance Premiums
Did you know that the money you pay for your private mortgage insurance is tax deductible? It is. Even better, if you itemize your deductions, you can claim this and still claim your interest deduction. This is an important deduction for newer homeowners who haven't built up their equity yet.
Charitable IRA Distributions
One of the peskier rules of the IRA is that you have to start taking payments from the fund (also called taking distributions) once you reach 70.5 years of age. Yep-even if you are still working or don't have a need to tap into the fund just yet. If you don't take your distributions you can face steep penalties. Even worse, if you have a traditional IRA (instead of a Roth IRA), you have to pay taxes on those distributions. Ouch. This year, though-you can donate those distributions to charity instead of putting them in the bank. Donating your distributions to charity keeps you from having to report them as income. You can also help a charity, which feels good. So it's a win-win!
Before you get excited, you should know that this deduction is only allowed for people who live in a state that doesn't have a state income tax requirement, like Nevada or Florida. See, if you live in a state that has an income tax (which is most of them), you can often deduct the amount you paid in state taxes on your federal taxes for the next year. People living in no-state-income-tax states can't do that so they are allowed to deduct what they've paid in sales tax over the year. Most of the time your annual income is used to figure out a standard sales tax deduction but if you've made some big ticket purchases, figuring out your deduction can be tricky. You might want to ask an accountant to help you get it right.
If you have to take the bus to work or pay for parking while on the job and you pay those costs out of your own pocket, you can qualify for a tax deduction. For 2013, you can claim up to $245 a month in public transit costs and $245 a month for parking. These amounts are scheduled to drop to $130 next year.
Buying an electric car can qualify you for up to $7500 in tax credits, depending on the size of your new car's battery pack. If you've made energy efficient upgrades to your home, you can claim up to $500 in your lifetime. Separately, if you buy energy efficient appliances, you can qualify for up to a $500 tax credit. Before you go out and buy all new appliances, though, make sure that your purchase will qualify for the credit!
NOTE: There is also a debt-relief tax provision that is expiring this year that is a little difficult to explain succinctly. The Wallace and Associates APC blog has a great post that explains the intricacies of it and how it might affect your family.
Every year the tax code changes a little bit, which can make figuring out your 1040 an annual hassle. To reduce your risk of tax migraine, start gathering your paperwork and learning about potential deductions now, while you still have a few months to prepare for filing. Or consider hiring an accountant to take care of things for you!