5 Tax Tips as we approach the end of 2012

Last year at this time we reviewed some deductions to close out the 2011 Tax year.   Here are 5 Personal Tax Tips we can look at as we close out 2012:

1)      Check your withholding and boost it in December if necessary.  You must take a look at where you stand in your particular case.   Some folks actually should advance a payment in December to lower the penalty for underpayment.  To cover yourself you should advance 110% of your 2011 total tax.  This is especially for folks earning more money in 2012.

2)      Make catch-up 401(k) contributions.  Contact your local Human Resources Department to get the procedure for maxing out your account for 2012.  The deadline is 12/31/2012.  This is different than funding a personal Ira or Roth IRA, where the deadline to make a contribution for tax year 2012 is actually 4.15.2013.

3)      If you can afford it, take advantage of the gift tax exclusion.  For 2012, anyone can give anyone $13,000 per person without any gift tax consequences.  This way you can give away small shares of your portfolio yearly and avoid any future gift tax on the items.  This can be a large estate tax saving tool and should be looked at in the context of your entire plan.

4)      Some will potentially want to sell losing stocks as the year end comes upon us, and some witll want to sell winning stocks depending on the particular situation.  Many will want to take advantage of gains before year end as they may be in a top tax bracket and be potentially exposed to higher capital gains rates for 2013 and beyond.  Or some may sell $3,000 of losing investments in excess of gains at year’s end to take advantage of the tax savings on the 2012 tax return.  Please consult a qualified advisor to help you if you don’t understand this process.

5)      One deduction I never like to see is the medical deduction.  However it does help to lump your medical deductions if there is going to be a year that you have large medical expenses.  You can prepay doctors or dentists if you are already over the threshold in order to make sure you get the largest possible deduction.

 

One more thing:  You will hear a lot about the fiscal cliff in the next few weeks as Washington’s finest strut their stuff.  Pay close attention to how this may affect your personal situation before making any financial decisions.

Listen to wnbp.com every Tuesday morning at 8:30 for sinsightful tax and financial chats with morning guy Win Damon.  Please click below for the podcast.


With more than 23 years of experience as a credentialed tax professional, Stu Steinberg, CPA, MBA brings a broad depth of knowledge to his work. He has worked with families and small business entrepreneurs for many years helping them plan more effectively. He can be reached at stu@erocktax.com or (781) 247-5569 anytime.

 

 

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