Tax Planning year end tips

Well, Christmas has passed, and that means that the next big thing coming is…. the final throes of the 2012 tax planning period. Never mind parties, football, and the Rose parade. Who can think of anything else while there is still time to do a few things that will lower your income taxes for 2012? But time is running out. If you don’t act now you may be writing larger checks come April 15!

Here are a few things to consider:

1.       Donations to charity this week will impact your taxes in April if you itemize deductions. Time to clean out the closets and make a Goodwill run. Keep a detailed list of what you donate and get a receipt. If you leave stuff at a drop box document what you left and the date and time.

2.       Make sure your final paycheck maxes out your contribution into elective retirement plans such as your 401k or Simple Ira plans.

3.       If you drive a car for business and are taking business deductions, take it in for service this week. Not only will you incur a deductible expense, but the service ticket will document the odometer reading by a third party.

4.       Consider selling losing investments now. The trades must settle by 12/31 so you have to act fast if you want this to impact your 2012 taxes.

5.       You may want to prepay some of your state taxes by 12/31. If you are not subject to AMT and you will owe the state in April it may be a wise move to write the check by Dec 31 and get a federal deduction for the payment.

You should consult with your tax advisor before doing anything. Depending on your situation these tactics may not have the desired effect, and there may be other things that you can do as well.

Regardless of what you decide to do, I wish all of you a safe and Happy New Year.

Paul