Nobody wants to think about taxes heading into the holidays. But there are tax opportunities now that disappear at the end of the year, and others where more time means less pain and better planning.
The tick-tock of the clock can be turned into the clink-plink of money in the bank for those who get an early start on year-end tax planning.
Although April 15 is six months away (183 days, but who’s counting?) many opportunities to lower your tax bill go in the trash with your 2011 calendar. If you want to maximize your savings, there are reasons to start sooner rather than later.
In the video below, Money Talks News founder Stacy Johnson offers some tips for lowering next April’s bill to Uncle Sam for 2012. Check it out, and find more details on the other side.
As Stacy said, the sooner you get started on your tax planning, the better – so let’s get straight to it. Here are four ways to save…
- Claim energy credits. These help homeowners with two bills: taxes and electric. Stacy used his tax refund last year to score a $1,500 energy credit on the next one, and the energy-efficient A/C he got means another $1,200 a year in utility savings. Learn how he did it in 3 Steps to Convert This Year’s Tax Refund into Next Year’s Tax Credit. The credit being offered this year isn’t as big, but it’s nothing to sneeze at: 10 percent of qualifying expenses (up to $500) on windows, heating, cooling, insulation, and other products. You can find a list of what counts and tax credit details at EnergyStar.gov. But this deal expires Dec. 31, so start calling contractors to compare prices and schedule an appointment today, before everybody else does.
- Hoard for retirement. As Stacy mentioned, you have until April to pump funds into your IRA, but your 401k at work? Only till Dec. 31. With a 401k cap of $16,500 if you’re under 50, and $22,000 if you’re older, that’s a lot of money to squirrel away – and a lot of money to shelter from the tax man. Act now to boost your contribution and you can chip in over multiple months, instead of doing it all at the last second – when you’ve got Christmas shopping to do. After that, focus on your IRA, which has a smaller age-dependent cap of $5,000 or $6,000.
- Give to receive. As with retirement funds, charitable cash donations are more manageable when spread over multiple months. And when it comes to donating goods, don’t wait to clean out your closet and garage, because you’re going to get busier toward the end of the year. You’ll be in good cheer for the holidays if you know you lowered your taxes and helped others in the process. Just make sure you’re donating to the right people – check out 5 Tips for Deducting Holiday Giving.
- Win with losses. You can use stock or investment losses to offset gains elsewhere, or reduce your taxable income. True, you can wait until Dec. 31 to do this, but it doesn’t hurt to take a careful look at how your portfolio’s doing and test a few tax scenarios now.
If you don’t have the money to take advantage of these tax tricks, there’s still good news: Read How the Price of Milk Might Lower Your 2012 Taxes. And while actually filing is far off, check out 10 Tips to Avoid an Audit, because sometimes it literally pays to be prepared.