The new year is right around the corner. And shortly after that is the stressful time of year when taxes are due. Although taxes are always high – unreasonably high by some people’s standards – they’re probably about to get a lot higher. Thanks in large part to the impending fiscal cliff, experts anticipate higher tax rates in 2013 for nearly everyone.
With that in mind, consider making some changes to your end-of-year finances. Here are 10 tax tips to consider before the ball drops:
1. Wait until January to donate
If you’re planning on making a big donation to a charity around the holidays, it may make sense to put it off until January. Higher tax rates next year could mean that the same donation will be worth more on your tax return next year. Check with your accountant.
2. Reassess your retirement contributions.
Contributions to a retirement plan like a 401(k) are tax-exempt. Anything you put into the account now won’t count toward this year’s total income. Additionally, you could earn extra money for retirement if your employer offers to match your contributions.
3. Use your home advantage.
Property taxes and interest on your mortgage are tax-deductible. If you’re holding off on finalizing a home purchase, it might be time to take the plunge.
4. Pay your January bills early.
If you’re looking for extra savings on this year’s taxes, pay next month’s mortgage and student loan bills a little early. That way, you can deduct the interest from your taxable income and deal with fewer bills in the new year.
5. Utilize flexible spending accounts.
Don’t risk losing any money left in flexible spending accounts for medical bills. If you have money left over, make last-minute appointments and stock up on medicine.
6. Make home improvements.
You may be eligible for tax credits to alleviate the cost of energy-saving home improvements. Consider weatherizing your house, installing solar panels or otherwise making your home a little greener.
7. Start a 529 Plan.
This type of plan allows you to save up for future educational expenses. Money earned in the plan is tax-deferred.
8. Review your investments.
Talk with your stock broker to find out exactly where your portfolio stands. In some cases, cutting your losses can be beneficial come tax season.
9. Prepare your paperwork early.
Even if you don’t plan to file your taxes for a few more months, you can start sorting your paperwork now.
10. Put your credit cards away.
This is a smart idea all year long, but avoiding credit card debt over the holidays is crucial. By avoiding interest charges, you can enter the 2013 tax season on the right track.
You still have time to change some aspects of your income and filing status for 2012, but nothing can be done after Dec. 31. After that, concentrate on getting your files in order until you’re ready to submit everything.