Time is running out to make tax-saving moves for 2012. Here’s a sampling of ideas to consider.
* Maximize the contributions to your employer’s tax-deferred retirement savings plan, thereby saving taxes immediately and deferring taxes on earnings in your account. Also don’t overlook an IRA contribution if you qualify.
* If you’ve held appreciated stock for more than one year, consider donating those shares to charity rather than making cash donations. You’ll avoid paying taxes on the stock’s appreciation, but can generally claim the full fair market value of the stock as a charitable deduction.
* Adjust your withholding. Increase the income tax withheld from your paycheck through year-end to cover extra amounts due from Roth conversions or other taxable income increases in order to avoid underpayment penalties. Alternatively, reducing your withholding to account for an overpayment puts money in your pocket now, instead of next year when you file your return.
* Schedule charitable contributions. Cash and checks mailed by year-end count as 2012 deductions, as do credit card charges you make by December 31. Donations of appreciated securities are deductible when you relinquish control. Allow extra time for stock transfers handled by your broker or a mutual fund company.
* Make family gifts. For 2012, the annual amount you can give away to any individual, free of gift tax, is $13,000 ($26,000 when you’re married and make the gift with your spouse).
* Plan for elective health care expenses. Use up the balance in your flexible spending account (FSA) by year-end, and figure out how much you’ll contribute in 2013. No FSA? You still have time to set up a health savings account (HSA) and make a deductible contribution.
* Remember required minimum distributions. Failing to take a required distribution from your traditional IRA before year-end could cost you 50% of the amount you should have withdrawn.
These are just a few of the tax-cutting moves you should review. For help in finding the right moves to make in your particular situation, give us a call.David Bradsher, CPA