Tags: Fiscal Cliff | Kiplinger | taxes | steps

Kiplinger: 12 Individual Tax Remedies for the Fiscal Cliff

By John Morgan   |   Friday, 30 Nov 2012 07:57 AM

Nearly 90 percent of Americans will pay higher taxes unless Congress agrees on a fiscal cliff compromise, but there are some tactics that can help lower your tax bill regardless of what Congress does, Kiplinger reported.

The personal finance publisher listed 12 steps — some logical and some less obvious — that individuals might want to take before year-end to trim their tax bites. Not all of them will work for everybody, but they are all worth investigating.

1. Contribute the maximum to a 401(k) before 2013.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

2. Increase the number of allowances taken to ensure lower withholding, which gives an individual use of their money earlier.

3. Avoid underpayment penalties by ensuring enough is actually withheld.

4. Do not defer discretionary income into 2013, when taxes are likely to rise. Record the income this year.

5. Plan deductions by investigating which ones may be more valuable for either 2012 or 2013.

6. Consider selling appreciated securities by Dec. 31. Even if Congress does not raise rates on capital gains or dividends, a new 3.8 percent surtax on unearned income for high-income individuals looms.

7. Convert traditional IRAs to a Roth. Withdrawals from traditional IRAs are taxed at the ordinary tax rate, while Roth withdrawals can be tax-free for those at least 59 ½ years of age. Even if tax reform next year lowers individual tax rates, the conversion can be undone if necessary until Oct. 15, 2013.

8. Avoid end-of-year mutual fund purchases in non-retirement accounts, since the payout of dividends will be taxable for 2012.

9. Give to charity and write off the donation.

10. In addition to giving appreciated stocks or mutual funds to charity, individuals 70 ½ years or age or older may be able to make a tax-free charitable distribution of up to $100,000 from their IRAs directly, if Congress approves an extension of that IRA rule.

11. Make individual gifts to family and others before 2013, when gift-tax exclusions are expected to be lower and maximum estate tax rates will rise.

12. Spend down 2012 flexible spending accounts if your employer deadline requires it by year-end.

Separately, TurboTax recommended paying some expenses before the end of the year, including those for estimated state income tax bills due Jan. 15, property tax bills due early next year or medical bills. However, speeding up deductions can be a mistake for those subject to the alternative minimum tax, TurboTax said.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

© 2015 Newsmax Finance. All rights reserved.

1Like our page

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved