Six end-of-year tax strategies

Amy Marty writes: Another year is winding to a close. Have you taken advantage of any tax-planning opportunities? Here are a few things to consider. As always, check with your CPA or tax preparer to see which deductions apply to you.

• Contribute to an IRA. Doing this not only helps build your nest egg, it can save you money on your tax bill. The maximum tax deduction you can take for 2013 is $5,500, $6,500 if you are over age 50. The benefit phases out as your income increases. So check with your accountant. If you don't have an IRA in place, it must be opened by Dec. 31. You can make the contribution until April 15, 2014, and still deduct it for 2013 taxes, but making your contribution before year-end starts the tax-deferred growth sooner.

• Make your home energy efficient. Did you know you can get a tax credit of up to 30 percent of the costs if you make qualified energy-saving home improvements by the end of 2013? The improvements must meet energy-efficiency standards in order to qualify for the credit. Go to www.EnergyStar.gov for more information.

• Review your investments. Consider selling investment losers to offset capital gains. When calculating your gains and losses, be sure to include mutual fund distributions; they are taxable gains even when you hold on to the shares. You may want to sell appreciated securities before year-end. If you have excess losses, they may be carried forward into future tax years, at a rate of no more than $3,000 each year.

• Make charitable contributions. You can make gifts to charity with cash or with appreciated securities. If you donate appreciated securities (like stocks), you can take a deduction for the current fair market value. In my practice, I often recommend this strategy. Meet with your financial advisor right away to see if this would benefit you.

• Fund college expenses for your child or grandchild. Contribute to a 529 college savings plan and you may reap some state income tax benefits. You also will ensure tax-free withdrawals from the plan to pay for future college costs.

• Establish a health savings account. Taxpayers with high-deductible health plans who are not covered by any other health insurance or enrolled in Medicare may deduct contributions to a health savings account (HSA). HSA distributions are not taxable if you use them to pay for qualified medical expenses including deductibles and co-payments, over-the-counter drugs, long-term care insurance, and health insurance premiums or medical expenses during a time of unemployment.

An HSA provides triple-tax savings: Contributions are tax-deductible, earnings on the account are tax-free, and withdrawals for qualified medical expenses are also tax-free. The account goes with you if you change jobs or move, and unused money in the account may be used in future years.

Following these suggestions can reduce your tax bill for 2013 and into the future. But keep in mind that if you are subject to the alternative minimum tax (AMT) you may lose most deductions, so you'll need to follow very different strategies. And don't forget state income taxes in your planning: the rules there may differ from federal tax rules.