The Cliff. Congress. White House. Discussions. Negotiations. These words have become commonplace in our day to day conversations. And if Congress doesn’t act before the end of the year, there is a chance that tax rates will be higher for individuals next year. That makes end-of-the-year tax planning especially crucial for 2012.
So get your ducks in a row! In the next blogs we’ll go into greater detail about tax-saving moves, but for now let’s look at some of the basic things you should be thinking about to lessen your tax burden for 2012.
- For any donations you make, get your paperwork in order. If your documentation isn’t correct for your charitable gifts, you risk losing the donation value. There are different rules for documenting gifts below and above $250, as well as for cash and non-cash donations, so be forewarned and forearmed.
- See if it makes sense for you to leverage the Standard Deduction by ‘Bunching’ deductible expenditures. You may not have enough itemized deductions to itemize for 2012. But if you are close to being able to itemize, you may decide to increase charitable donations, or pay off real estate taxes ahead or pursue some other strategy to enable you to itemize deductions. Or it might make sense to look ahead to your income in 2013, when tax rates may be higher, and push more deductions into 2013, in which case you can take the Standard Deduction this year.
- You could accelerate any un-reimbursed medical expenses into 2012. If you are close to exceeding the medical expense deduction ceiling (7.5% of AGI), then you may want to get all your medical needs maxed out this December to make sure you can take that deduction – the ceiling goes to 10% of AGI next year.
- Think about making a gift of Stock or Mutual Fund shares (more on that in the next blog).
- Talk to your financial advisor about the changes coming in Long-term Capital Gains Rate, and see if you are eligible to profit from this year’s lower rates.
- Look back at your income for 2012, and see if it makes sense to adjust your Federal Income Tax Withholding on your paycheck. It’s an easy way to bump up the taxes you’re paying in – if you’ve paid at least 90% of your 2012 tax liability, you may not have to pay a penalty on any taxes that were unpaid.
For help with these and other tax issues, contact Litchfield County, Connecticut tax attorney Martha Miller, admitted to practice in CT, NY, and before the US Tax Court at 860-435-4666. We accept state tax problems for CT, MA and NY, and we accept U.S. federal tax problems from any location in the world.