Tax Planning Strategies

To my friends, family and clients:
 
As we near the end of the 2012 tax year, I want to provide you with some planning strategies you may find helpful in lowering your tax liability.........

Contribute Max to Retirement Plans
- 401k’s up to $17,000 (+ $5,500 catch-up if over 50 years old)
- Traditional IRA’s up to $5,000 (+ $1,000 catch-up if over 50 years old)
 
Prepay Property Taxes 
- Pay February, 2013 property tax installment by December, 2012 
 
Prepay Mortgage Payments
- Pay January, 2013 mortgage payment by December, 2012
 
Make Charitable Donations
- If you “tithe” on income as earned, prepay your 2013 tithes by December, 2012
- Donate appreciated stocks held more than one year (can deduct full market value & pay no capital gains tax…versus first selling stock then donating proceeds)
 
Sell Loser Stocks
- Sell stocks that are currently worth less than you paid for them 
- Nets against other capital gains + can take $3,000 net capital loss
 
Turn Your Hobby into a Business
- Losses reduce other taxable income with very few limitations
 
Maximize Health Savings Account Contributions
- Account earnings are tax free & contributions reduce taxable income
- $3,100 max for individual plans…$6,250 max for family plans
     (+ $1,000 catch-up if over 55)
 
Consider Refinancing
- Any points paid on a previous refinance will be fully deductible in tax year of new refinance
 
REMEMBER:
- Additional income is taxed at your top tier percentage.
- Conversely, any deductions from income save taxes at your top tier percentage.
- Reducing taxable income not only saves taxes at the top tier percentage, it may also help you avoid phasing out of tax deductions & credits (includes child tax credit, student loan interest deduction, education credits, etc.)

** Each situation should be analyzed individually. Alternative Minimum Tax rules may negate the impact of the strategies mentioned below. Most strategies mentioned help those who itemize deductions.