While some believe the number 13 is associated with bad luck (or good luck depending on your perception), here are 13 tips you can use in your tax planning for 2013.  Good tax planning is essential to achieving your luckiest or best possible tax position when it comes to tax return preparation time.  Several of these tax breaks were extended by the American Taxpayer Relief Act (ATRA) which was passed at the beginning of 2013.

1.  Capital gains and losses – Capital losses may only be used to offset capital gains dollar for dollar.  However, an additional $3,000 in capital losses may be used to offset ordinary income.  Any remaining capital loss may be carried forward to future tax years to offset future capital gains.

2.  Vacation home limitations – If you rent out your vacation home when you are not using it, you can generally deduct related expenses from the rental income. However, if your expenses exceed the income you cannot deduct the loss if your personal use exceeds the greater of 14 days or 10% of the time the home is rented out.  A day spent fixing up the home doesn’t count as a personal use day.

3.  Business equipment purchases – Under Code Section 179 of the tax code, you can currently deduct up to $500,000 of qualified business use property placed in service in 2013 (subject to a phaseout threshold of $2M).  These thresholds were extended through 2013 by ATRA.  Absent any new legislation, the maximum Section 179 deduction will be reduced for 2014 to $25,000 (subject to a phasout threshold of $200,000).

4.  Non-Cash Charitable Contributions – Generally, you can deduct the fair market value of property you donate to a qualified charitable organization if you’ve owned the property for more than one year.  You can search for qualified organizations at www.irs.gov.

5.  Residential Energy Credit – This 10% credit had technically expired after 2012, but was revived retroactive to 2012 and extended through 2013.  It covers energy-saving improvements installed in your home this summer like central air conditioning and advanced main air circulating fans, as well as, insulation materials, exterior windows and skylights, exterior doors, natural gas, propane and oil water heaters or furnaces, water boilers, electric heat pump water heaters, biomass stoves and certain metal roofs.  A lifetime credit maximum of $500, as well as, other specific limits, applies to qualified expenses.

6.  Tax perks for business trips – If you travel overnight you may deduct your travel expenses including airfare, lodging and 50% of the cost of meals when the primary purpose of the trip is business related.

7.  Be mindful of the “wash sale” rules – You cannot deduct losses related to wash sales.  A wash sale is triggered if you acquire securities within 30 days before or after selling “substantially identical” securities at a loss.

8.  Be aware of rules regarding entertainment – If you entertain clients or customers at a country club before or after holding a “substantial business meeting” with them, you can deduct 50% of expenses such as green fees, cart rentals, club rentals and meals.  (Note:  Country club dues are never deductible)

9.  Give generous gifts to graduates – Generally, you can claim a dependency exemption for a child graduating from college if you provided more than half of the child’s support (assuming you also meet the other dependency tests).  Figure the amount of total support of the child for the year and give a gift amount that will put your support over one-half of the total.

10.  Dependent Care Credit – If you pay someone to care for your child and your child is under age 13, you may qualify for the dependent care credit.  The credit for most parents is equal to 20% of the first $3,000 of qualified expenses for one child; $6,000 for two or more children.  The cost of day camp qualifies.  However, the cost of overnight camp does not qualify.

11.  Look for dividend-paying stocks – Generally, qualified dividends continue to be taxed at a maximum 15% rate, although a 20% rate applies above the same income thresholds as for long-term capital gains.  Add dividend-paying stocks to your portfolio if you can benefit from the 15% rate.  To qualify for the favorable tax rate, you must meet a 61-day holding period.

12.  Documentation is key for deducting mileage – Whether you own your own business or you are an employee in a J.O.B. (Just Over Broke), mileage expense can be a significant deduction come tax time.  As an employee, mileage expense is deductible as unreimbursed employee expenses only if you itemize your deductions.  If you own your own business, the deduction for mileage expense is a direct reduction of your income.  Regardless of which category you are in, you should always keep a log showing the date, to and from destinations, the business purpose and the number of miles traveled.  A simple spreadsheet can be used for documenting your mileage expense.

13.  Start your own home based business – On average, a home based business will yield you a $4,000 tax refund per year!  In fact, Uncle Sam will pay you to run a home based business.  Now is the perfect time to start.  If you keep your options open with regard to making any money outside what you are currently doing, feel free to connect with me and ask me how Uncle Sam can help you.

IRS Circular 230 Disclosure:  In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.