5 Great Tips for Your 2012 Taxes
While April 2013 may seem like a long time away, in the world of taxes it’s just around the corner. What you do now could determine the kind of tax year you have in 2012. And with a number of lucrative tax benefits set to expire this year, there’s no better time to take action.
Here are 5 ways you can cut this year’s income tax bill.
You might need to readjust your paycheck withholdings to make sure you don’t come up short on taxes when you file your 2013 tax return.
It is worth a look to make sure you are having the correct amount withheld from your paycheck.
You can use IRS Form W-4 to make changes to your withholding. Just complete it using the included instructions and provide it to your employer.
Taxpayers overlook many deductions. People who don’t itemize their deductions often wrongly assume they don’t qualify for any. Actually, there are some deductions available even to people who take the standard deduction. Generally, these are referred to as adjustments to income.
Among the overlooked adjustments are those for moving expenses for a new job, educator expenses, tuition and fees expenses, and student loan interest.
On the other hand, don’t take for granted that a deduction from last year is still available. Check the 2013 rules now to make sure the deduction you’re counting on is still available.
Since 2001, taxpayers have been getting a major tax break in the form of reduced income tax rates. These lower rates, a reduction of 2% to 3.5% from previous rates, will continue in 2012.
For some taxpayers, these rates are increasing in 2013. So now might be the time to take that bonus or any higher fees or additional salary you have coming to you so you can pay tax at the lower rate.
Even though the relatively low tax rates for long term capital gains were extended in late 2010, you might want to plan ahead for eventual increases in the tax rate.
The rates are currently 15% for the upper four tax brackets and will increase for certain taxpayers in 2013.
If you’ve sustained capital losses during this recession, take heart. They can be used to offset capital gains triggered by the recovery. Take a hard look at your portfolio. Consider how you can match one transaction against the other to reduce your tax burden.
Don’t forget that you’ll need to match long-term against long-term and short-term against short-term. If you’re facing a really big capital gain, you might consider selling some losers before year's end. Additionally, you can use up to $3,000 in capital losses to offset other income. But don’t wait until the last minute. The longer you wait, the less time you’ll have to make the right matches.
The best tip of all is to stay informed on the ever-changing tax laws. New credits and deductions are introduced all the time.