As many dentists know, the upcoming year end is always the time to consider minimizing your taxes. Here are a few tips from the CPAs at the Dental CPAs.
- Maximize your contributions to retirement plans. Contribute more to your 401k by the end of the year to reduce your taxable income and your tax bill.
- Consider using a credit card to prepay expenses that can generate deductions for this year such as supplies. Also, some dental vendors offer no financing loans to purchase supplies.
- For 2012, the section 179 expensing limit is $139,000. For 2013, as it stands now, is $25,000 of purchases so if large equipment cost purchases are being considered, you may want to do them while the higher expensing limit is available.
- Bonus deprecation is also available for 2012. Meet with your CPA to see what combination of elections makes the most sense for you. Consider equipment purchasing with loans as well so that you don’t have to lay out the cash but still get a full deduction for the purchases.
- Prepay your mortgage and real estate taxes. Even if your payments aren’t due until January, you can pay them in December to deduct this year, if you itemize. Beware though that if you are subject to the Alternative Minimum Tax (AMT), the real estate tax deduction may not be of any additional tax deductible value on your Federal tax return.
- Give away your money. If you were planning to give a lot of money to someone, utilize your annual gift exclusion of $13,000. This is not an income tax savings strategy but rather is an estate reduction strategy. If you are concerned about having a large taxable estate, don’t miss the opportunity to utilize your annual gift exclusion each year.
- Finalize your records. If you plan to deduct mileage on your personal car, make sure your mileage logs are complete. Review how long you need to keep your paperwork before throwing out any records.
- Do an AMT analysis. If there’s a chance that you will be subject to AMT, analyze your deductions to see if you are better off waiting to make some of the above moves. Once AMT comes into play, some of the end of the year tax moves will have no tax benefit. Deductions such as state income taxes and real estate taxes are always an AMT deductibility issue.
- Fund your IRA. If you cannot do a deductible IRA contribution, consider whether you should make a non-deductible IRA contribution as it could become a possible future Roth IRA conversion for retirement or estate planning purposes. You have until the tax filing deadline including extensions to make your IRA contributions.
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