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End Of Year Tax Tips

December 5th

Holiday season is a busy time of year; it’s easy to get distracted. But now is also a time to start thinking about your finances – specifically, what steps you can take before December 31 to help save you money on your 2012 tax return. Some strategies could help reduce your tax debts come next April. Any one of them could be especially helpful if lawmakers don’t act to extend the many popular tax credits set to expire at the end of 2012.

5 Tax Steps To Take Now

Make a donation. Consider moving charitable donations normally made in early 2013 to the end of 2012. Donors can get a full deduction if the taxpayer has proper documentation. For cash contributions of less than $250, you must retain either a bank record that supports the donation, such as cancelled checks or credit card receipts or a written statement from a qualified charity.

Accelerate medical expenses. The threshold for deducting these expenses, now 7.5% of adjusted gross income, rises to 10% next year for most taxpayers. If your out of pocket 2012 medical expenses are close to the 7.5 percent floor this year, you may want to take advantage and schedule appointments not covered by insurance before end of the year.

Set up a health savings account for 2012. Qualified taxpayers can make 2012 contributions to HSAs as late as April 15, 2013, but the account has to exist by year end.

Make an extra mortgage payment, or pay down principal. Usually taxpayers can’t pay more than one month of mortgage interest, but if you can, it will help if you think the mortgage-interest deduction will be curbed next year.

Write next semester’s tuition checks before year end. The American Opportunity Tax Credit allows qualified taxpayers to get a benefit this year for next spring’s tuition if the payment is made before year end—even though the credit is set to expire for 2013. For more information, see IRS Publication 970.

If you have any questions about how to further reduce your tax liabilities, consult with a tax debt attorney today.

 
 
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