Even as the hours slowly tick down toward 2013, there still is time to make last-minute moves to enhance your finances and lower your taxes for the year, according to financial planners.
Sharla Jessop, a vice president and private wealth management consultant at Smedley Financial Services in Salt Lake City, said that if you’re thinking about giving cash to a favorite charity, you may instead consider donating stock that has appreciated in value.
"Provided [you] have held those shares for at least a year and a day, [you] can donate the stock before the end of the year and not have to pay any capital gains," Jessop said.
She also noted that parents holding stocks that have appreciated may want to give them to their children as a gift before year’s end. Although the children "still will have to pay the capital gains, they typically will be in a lower tax bracket than their parents."
Jessop added that if you anticipate selling stock within the next six months that has risen in value, you may want to liquidate your position now because capital gains taxes are expected to go up in 2013.
Here are some other year-end tips by financial professionals.
Do your donations • If you want a charitable deduction on this year’s taxes, you need to write that donation check by Dec. 31. Donations made on a credit card by Dec. 31 are deductible for 2012, even if you pay the Visa bill in 2013, the Internal Revenue Service says. A gift by check also counts for 2012, as long it’s mailed in December. Gifts to individuals — friends, family or strangers — are not deductible.
Max out the 401(k) • It’s a gift to yourself, a little more retirement cushion. If you haven’t maxed out the annual contribution to your 401(k) at work, do so now. For 2012, the annual contribution limit is $17,000; next year, it goes up to $17,500. If you’re over age 50, you can make an additional catch-up contribution this year of $5,500.
Ditto for your IRA • To boost your retirement savings, don’t forget these contributions. In 2012, the maximum contribution to IRAs and Roth IRAs is the smaller of $5,000 or your taxable compensation for the year. For those age 50 or older, the limit is $6,000.
If you’re not covered by a retirement plan at work, you can get a full tax deduction for IRA contributions. If covered by an employer’s retirement plan, you can take a deduction up to certain income limits (i.e. no deduction is allowed for married couples filing jointly with incomes above $112,000).
"Moving" donations • If you’re donating a car, boat or plane to a charitable organization at year’s end, the IRS reminds that you can deduct only the fair market amount when the car is sold by the charity. This applies to vehicle deductions valued at $500 or more.
Spend those FSA dollars • If you have a Flexible Spending Account at work to cover health/dependent care costs, now’s the time to make sure you’ve exhausted all those tax-free, use-it-or-lose-it dollars you squirreled away. Once you’ve spent those dollars, you’ll still need to file claims through your employer’s health plan to get reimbursed.
Know your deadlines • For dependent care (such as child care or adult day care), the deadline to incur expenses or file claims is Dec. 31. For health care expenses, many employers offer a grace period through the first part of 2013. Check with your employer’s plan for deadlines.
Note that not everything you buy is reimbursable as a health care expense. For a detailed list, go to IRS.gov or your health care provider’s website.
Prepare the paper • Now is a good time to start gathering the paperwork for filing your 2012 taxes. Even if it’s simply tossing it into a shoebox, start collecting proof of income (pay stubs, 1099s, W-2s) and proof of deductions/donations (charitable receipts, canceled checks, credit card statements, payroll deductions).
Whether you use a professional tax preparer or do your taxes yourself, getting organized now can ease headaches down the road.
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