Taxes in December? Yup! There are things you can do before the start of 2012 to make sure your finances are in order, and that your are prepared for tax season. Granted you don’t have to file your taxes until the April 15 deadline, in order to get needed tax breaks you must complete these steps before the 2011 year is over.
With the holidays around the corner, taxes are probably the last thing on your mind right now. Not completing these tune up tips may leave you in a jam come April.
Some of the pre-planning involves making payments you have been holding off, while others are more organizational like methods.
Accelerate Your Payments, Get Higher Deductions
People often put off certain payments or expenses, whether out of procrastination or just not having the money. If you are able to make payments in advanced, go ahead and make them before December 31, this way you will be able to increase your task benefits.
Here are some ideas for accelerated expenses:
Give to Charity: If you have been thinking of donating those old clothes, or even supporting a good cause, do it within the next month to increase your tax return. Usually when donating time, money, or items to a charity, you will have the option of taking a charitable deduction. Even if you choose to do this with a credit card it’s okay, you don’t make the actual payment until January of 2012 as long as you make the charges before the last day of December.
Make Your January Payments In December: Do you have a mortgage payment coming up? Make it in December 2011, that way you can pick up an extra month’s worth of mortgage deductions. This move may have to be orchestrated with your lender as you may have to compute additional interest if they have already calculated their 1098.
Another homeowner-related payment you can make is prepaying your 2012 property taxes. This prepayment will allow for an added deduction on your report. However, it is important to note that not allow counties support this method, so see if you can do so in yours.
You can also prepay medical expense payments that will be due in January, but they most exceed 7.5% of your adjusted gross income.
Contribute More: Another thing to look is your retirement plan. If you have a 401K or IRA, increasing your contributions is a good way to get large tax deductions, the majority of individuals with these plans can contribute up to $5,000 for the 2011 year.
If have a 529 plan that allows for a deduction on contributions see if you can make your contribution before the end of the year. This also applies for other higher education expenses, if you can pay off next springs tax deductible college costs now, go for it.
Delay, Postpone and Differ Incoming Cash
I know we just went over ways to get ahead of payments, but in this case it’s better to delay. Deferring income will keep your tax payments lower.
Don’t Sell, Sell, Sell: If you have investments with capital gain do not sell them, selling in 2012 because the long term capital gain rate is said to increase up to 20% next year.
Back up the Bonus: Congratulations, you are eligible for a yearly bonus! Ask your bosses to give it to you in January instead of December.
Wait to Collect: If you are owed debts, or compensation for certain jobs, once again wait until 2012 to collect this money.
Basically, if there is any income you can postpone, do so until next year. These final tips may be difficult because many are on tight budgets this Holiday season, but the payoff is worth it. Putting a little bit of planning and consideration this month will help you once tax season rolls around.