6 Important Tax Tips for 2012
With the holidays approaching it can be quite easy to overlook that tax filing season will immediately follow. That oversight can cost you especially if you do not take advantage of certain tips now that can affect your tax filing later. Enjoy your Christmas and New Year’s holidays, but set aside some time now to get your tax planning in order right now.
1. Charitable donations. If you itemize your deductions, you can benefit from specific year-end donations made to one or more qualified charities. Those donations can be made in cash or material goods, with a check or a receipt offering proof of your donation. Consider what you can donate today to reduce your tax burden for this year.
2. Health deductions. You may already be deducting your health care premiums. You can also deduct physician office visits, the cost of your prescriptions and other related medical expenses. If your expenses are high, get in your appointments before the year comes to an end. Keep in mind that you can only deduct the amount of your medical care that is exceeds 7.5 percent of your adjusted gross income.
3. Mortgage interest. You typically make 12 mortgage payments for the year and deduct that interest. Why not make a 13th payment before December ends to increase your interest deductible? Just remember that the following year’s taxes should show that January’s payment was made in December.
4. Your losses. Did you lose money this year? No, not just on your stocks and bonds, but losses related casualty, disaster and theft. For 2012, thousands of homeowners in New Jersey and New York will be able to show these losses on their federal tax returns. Refer to IRS Publication 547 for guidance.
5. Family gifts. Giving financial gifts — whether money or property — can benefit the recipient tremendously. Making gifts now can benefit the recipient when they need it most and help reduce the size of your taxable estate. You can give $13,000 annually to anyone and raise that amount to $26,000 if gifts are made by you and your spouse. Remember, gift recipients never owe income tax on gifts. However, you might if you give above the IRS’ limits.
6. Retirement income. Add more money to your retirement account now, if possible. The money you contribute now can reduce your overall tax burden. Moreover, when you do eventually withdraw the funds, that money can be taxed at a lower rate as your yearly income will be lower.
You may find it easier to keep track of your year end expenses by downloading your tax software now and keying in much of your important information. Your accounting software, such as Quicken, can help out too, enabling you to find and increase your deductions before the calendar year comes to an end.
See Also — Tax Software: Should You Do It Yourself?