Reporting for Next Avenue, which provides news and discussion of issues relevant to Americans over 50 including topics related to money and security, Richard Eisenberg writes that the smartest moves you can make now are ones that ignore the what-ifs since no one knows how the tax rules will change.
His piece, “Year-End Tax Planning in the Age of the Fiscal Cliff,” provides 8 Year-End Tax Moves to Consider:
1. Rough out your 2012 taxes to see whether you’re likely to owe the IRS money or get a refund.
2. If you have a flexible spending account, or FSA, for health expenses at work, use every penny of it before January.
3. Load up on charitable contributions by Dec. 31 if you expect to itemize deductions on your 2012 return.
4. Try to put more money in your 401(k) plan before year’s end.
5. If you’re self-employed, look into opening a tax-deductible Solo 401(k) plan before Jan. 1.
6. Consider converting your traditional IRA to a Roth IRA if you’re confident your tax rate will rise after 2012.
7. See whether you’ll save on taxes by paying for some discretionary medical expenses this year.
8. Make year-end gifts to your children or grandchildren.
Eisenberg’s article also sources guidance from McManus & Associates’ founding attorney John O. McManus:
Next year, the estate tax exemption is scheduled to fall to $1 million and assets over that amount would be taxed at a 55 percent rate. President Barack Obama has proposed setting the estate tax exemption at $3.5 million and the estate tax rate at 45 percent. That’s more likely to happen than Congress extending the current estate tax rules, according to John O. McManus, an estate lawyer with McManus & Associates in New Providence, N.J.
But no one can say for sure what the outcome of the fiscal cliff negotiations will be. So estate planners recommend taking advantage of the estate and gift tax laws on the books this year. Making gifts to your kids or grandkids in December might not only save you taxes, it could help brighten their financial futures, too.
To read additional info from Eisenberg on his 8 Year-End Tax Moves to Consider, go to http://www.nextavenue.org/blog/year-end-tax-planning-age-fiscal-cliff.