It’s crunch time! Actually, it’s really crunch time! If you plan on implementing any year-end tax planning slash savings strategies, the time is now. Literally, Now! You have approximately 48 hours to do something that will save you some money for 2012. Are you anxious yet? You should be. You don’t want this opportunity to pass you by and not be able take advantage of it. So what can you do, you ask? Here are three things that you can do in the next 48 hours to get you started on the right tax –planning foot for the New Year:
- Donate to Charity: If you make a donation to a qualified charity by December 31st you can deduct the value of your donation for the 2011 tax year. Where you decide to make the donation is completely up to you. Just make sure that it is a registered charity. The IRS requires that you have a cancelled check, a bank statement, credit card statement or written statement from the charity that sets out the amount of your contribution and identifies the charity. Remember, your donation does not have to be monetary. You can also make contributions of clothes, furniture or other household items.
- Adjust your Investment Portfolio: This is especially relevant for taxpayers who have incurred any gains in 2011. Now, this is obviously a decision that must be considered in the context of the current economic environment. If you believe that there is potential for your stock to recover in the near future, a year-end sale may be a bit premature. However, if the stock is unlikely to recover in the short run and it has incurred a considerable loss on paper a year-end sale may be appropriate. Generally, you can deduct capital losses up to the amount of capital gains, plus $3,000 from other income. If you are worried that you may not be able to use up all your losses, remember that you can carry-forward the excess amount to be deducted in future years.
- Make the Maximum Contribution to Retirement Accounts: The IRS recently issued a reminder for taxpayers who have made elective deferrals to employer sponsored 401(k) plans or similar workplace retirement programs for 2011. An elective deferral contribution allows a taxpayer to set aside part of her pretax compensation as a contribution. This arrangement requires that contributions must be made by December 31. However, if you set up a new IRA or plan on making a contribution to an existing IRA, you still have until April 17, 2012 to make a contribution that can be counted towards your 2011 limit and deduction.
Happy tax savings; and Happy New Year!
Written by Marsha Henry
December 29, 2011