As December 31 rapidly approaches, families are facing fears of the dreaded fiscal cliff, adding to the yearly anxiety of taxes. While we can’t tell you how things will turn out for the fiscal cliff, we can help you find additional tax savings for your family. Don’t miss out on these opportunities:
Voluntary Contribution to 401(K)
Great tax savings are experienced by increasing the voluntary contributions to employer-sponsored 401(K) plans. Even greater savings can be experienced if employers are able to match individual contributions. This is one successful way to prepare for retirement plus receive healthy tax savings.
Zero the Flexible Spending Account
Flexible spending accounts allow employees to accumulate part of their salary, prior to tax, to be used purely for qualified expenses, such as medical costs. The available funds expire at the end of each year; therefore it is highly recommended to spend the funds now.
If there are concerns of breeching income threshold and tax bracket requirements, then asking employers to defer additional income in the form of bonuses or over time, until 2013 is a good solution.
By paying January property taxes, mortgage payments and even medical bills by December 31, additional deductions can be claimed in 2012.
Donations to Charity
Charitable donations not only make a world of difference for the recipients, they are a great way to maximize tax savings. Make sure to keep receipts of all financial donations made throughout the year. This includes those made by check or through a payroll deduction scheme. It is not too late to make a donation to a charity to receive a healthy tax savings for 2012.
Gifts to qualified charitable organizations also include the donation of clothes, household goods, vehicles and property. In order to assist with taxation requirements, declarations of donations worth more than $250 will require documented evidence of the organization receiving the goods. Also, any donation of $5,000 or more will require proof of the market value of the property or item being donated, along with evidence of receipt from the charity.
Don’t Forget Charitable Expenses
The out-of-pocket expenses sustained when working for a charitable cause are also tax deductible. For example, the ingredients required for baking lasagna for a non-profit organization’s soup kitchen, or the yarns purchased to knit rugs for another organization’s winter appeal, are classed as charitable contributions and can be claimed. It is important to keep receipts of all expenses and to provide documented evidence from the charity in question to support the claim. The use of a personal vehicle for charitable works is also tax deductible. It is recommended to keep a travel log of mileage, and any tolls or parking expenses incurred.
Home owners who invested in energy saving devices such as wind turbines, solar hot water heaters and geothermal heat pumps during 2012 could be eligible to receive a refund. Although tax credits for some energy saving home improvements have expired, there are a few residential alternative energy equipment that qualify for a 30% government refund of the cost, including labor.
Remember, it is the responsibility of the person filing to retain the necessary records to substantiate all tax deductions. Also, there are several federal tax provisions scheduled to expire at the end of the year and changes are forecast for 2013.
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