Last-Minute Tips to Lower Taxable Income for 2013 (Click To View Video)

Northwestern Mutual writes: An estimated 180 million Americans pay federal income tax each year and for many, the goal is to pay as  little as possible. If that’s your objective, there’s still time to make sure you’re taking advantage of every opportunity to lower your tax liability for 2013, according to Dan Finn, Advanced Financial Planning Attorney at Northwestern Mutual. “Taking just a few steps today can have a significant impact on the amount you’ll owe at tax time in April.”  Finn suggests taking these last-minute steps to lower your federal income tax bill for 2013:

1. Maximize Tax-advantaged Retirement Accounts: By making pre-tax contributions to a qualified retirement plan such as a 401(k), 401(b) or traditional IRA, you can reduce your taxable income immediately. “For many taxpayers, making these contributions is the single most significant thing they can to do lower their tax liability,” said Finn. “Plus, because contributions to these accounts grow tax deferred, they’re a great way to save for retirement.”
2. Make Deductible Charitable Contributions: Millions of Americans donate to charity each year. If you’re among them, know that while most charitable contributions are tax deductible, gifts must be made before December 31, 2013 to take advantage of the tax deduction for 2013.
3. Time the Sale of Capital Assets: If you’ve triggered capital gains in 2013 by the profitable sale of stocks, for example, consider offsetting those gains by selling stocks that are in a loss position. “By timing the sale of assets—a practice often called tax-loss harvesting or tax-gain harvesting—you can have a significant impact on your tax liability,” said Finn.
4. Prepay Deductible Expenses: Many homeowners will choose to prepay 2014 state or local property taxes to take advantage of the federal tax deduction in 2013. State and local income taxes are also generally deductible on federal returns, although Finn says taxpayers who live in states with a high sales tax may benefit more by deducting sales tax rather than income tax. “If you live in one of those states, and you were thinking about making a big purchase in the next few months—like buying a new car—you might want to accelerate your plans, make that purchase in 2013, generate the sales tax this year and perhaps deduct it on your federal return.”