Even with barely a month left in the year, there are still moves you can make to limit your 2012 federal income taxes according to Gustavo A Viera CPA an Accountants in Miami. Here are a few things you can try between now and New Year’s Eve that might ease this year’s tax burden and set a course for dealing with whatever mischief Congress sends our way next year—and beyond:
Accountants Miami Top 6
Bunch Up Deductions
Prepay college-tuition bills. If you qualify based on your 2011 adjusted gross income (AGI), you can take either a dollar-for-dollar credit or a deduction for payments that go to academic periods that begin in January, February or March 2012. Three options are available: the American Opportunity college credit, which maxes out at $2,500 and expires in 2012; the Lifetime Learning higher-education credit, which maxes out at $2,000; or a deduction of $2,000 or $4,000 of college-tuition costs according to Accountants Miami, Viera.
According to Accountants in Miami, move as many deductible expenses as you can into this year—property taxes, charitable donations—and schedule any costly elective medical procedures, such as dental surgery, for example.
A trickier question is whether to manipulate income by, say, postponing bonuses or distributions from an individual retirement account. If you move enough income out of this year, you may improve the chances you’ll garner the tax savings from those itemized deductions that kick in only after surpassing a certain percentage of your AGI—medical expenses above 7.5% of AGI, for example. On the other hand, says Viera from Accountants Miami, even if tax rates don’t change, pushing income forward could jack up next year’s tax bill when you may have fewer options for deductions.
But don’t get carried away. An abundance of deductions of some particular types—real-estate taxes, state income taxes, itemized deductions—could throw you into alternative minimum tax (AMT) territory. When the AMT is triggered, most of those deductions will be disallowed. It’s easier to get caught than you may think. “If you live in a high income tax, high real-estate tax state,” says Viera, a CPA in Miami, “all you need is a nice bonus to push up your income and a new vacation home to push up your real-estate-tax deductions.” If your income is above $75,000 and you have significant deductions, you’d benefit from a planning session with your accountants in Miami now, while you can still make decisions that could help keep you out of that trap. April 14 is too late.
Energy-saving home improvements. This is undoubtedly the last chance to benefit from many of the federal tax credits for making your home more energy efficient. Initially part of the 2009 stimulus plan, most of the credits were greatly reduced for 2011, and many will expire Dec. 31. If you’ve been thinking of a new air conditioning or heating system or hot water heater for your principal residence, for example, you could get a credit equaling 10% of the cost up to $500. A solar energy system gets a 30% credit with no upper limit, according to Accountants Miami Viera.
If Congress doesn’t decide to make a change, this credit will be available through 2016, but to take advantage of it this year, you’ll need to have your system on the roof of either your principal residence or a vacation home and operational by Dec. 31. A quick survey of vendors in Texas found a few who believed they could manage it, but it would be tight.
General sales tax
Been wanting a new car? A giant flat-screen TV? A sailboat? Buy it before the end of the year, and you are eligible for a deduction on the state and local sales taxes. You cannot deduct both state income taxes and general sales taxes, so the deduction is usually most beneficial to taxpayers who live in a no-income-tax state. The tax break is scheduled to expire on Dec. 31.
Manage Your Portfolio
Charitable stock donations. If you donate appreciated stock instead of cash, you don’t owe any tax on the capital gains, and you can deduct its full value. Offset losses. With today’s market gyrations, you may be sitting on significant capital losses, which carry a $3,000 per couple/$1,500 per individual limit on deductions, according to Viera an Accountants in Miami. Under current law, you can carry the unused losses forward to future tax years, but this is one of those benefits that could be tweaked in any future tax overhaul. As a hedge, you might consider selling a big winner and offsetting your gains on it with your other losses. If you like that stock, you can turn around and buy it back. Yes, you can.
If you sell a stock at a loss, you can’t buy it back for 30 days or the Internal Revenue Service will disallow the deduction. But the IRS doesn’t care if you sell winners and buy them back.