Let's face it. The so-called fiscal cliff has us all worried.
It is nothing to trifle with; it will be driven by the of almost every tax cut enacted since 2001, as a whole commonly referred to as the Bush-era tax cuts. This would raise the average tax paid by the U.S household by $3,500 and reduce spending by $1.2 trillion over 10 years in more than 1,000 government programs including defense, Medicare, social programs and economic stimulus initiatives. But that doesn't you should sit back and do nothing. There are ways to save those hard-earned dollars.
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Got your attention? While the "cliff" sounds like an immediate calamity, it doesn't have to be. As 2012 draws to a close, there are tax strategies that will help you keep more of your money. Here are four ways to save on your 2012 .
Keeping More Of Your Year-End Bonuses
Assuming the Bush-era tax cuts will be eliminated, consider finding out whether your employer allows taking bonuses and payments for unused accrued vacation and personal days in 2012. This will save you the 5% in income was taken in 2013. (Two percent of that is from the 2013 increase in the Employee Tax from 4.2% to 6.2%, and 3% would come from the increase in the 2013 .) For example, if you received a bonus, unused accrued vacation and personal days of $20,000 in 2012 rather than in 2013, you would save $1,000 in additional 2013 .that you would pay if the
Capital gains are the income received on the sale of investment assets, including real property and stocks and . They are categorized as short-term and long-term. Short-term are assets held for a year or less, and long-term assets are held for more than a year.
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In 2012, short-term capital gains will be taxed as ordinary income with rates of between 10% and 35%, increasing in 2013 to between 15% and 39.6%. Long-term capital gains on assets held for more than a year will be taxed at 15% if sold in 2012, with the capital gains tax rate increasing to 20% in 2013. Thus a $10,000 capital gain taken in 2012 will save $500 in capital gains compared to the 2013.
However, if your 2012 ordinary holding period, and selling in 2013 could save up to $1,960 in .for short-term capital gains is more than the 2013 long-term capital gains tax of 20%, don't sell in 2012. For a $10,000 capital gain, waiting for the year
It's never too early to invest in Individual Retirement Accounts (IRA) for you and your spouse, even for your non-working spouse. For the entire IRA contribution to be deductible, the combined contribution can't exceed the taxable wages on your and neither spouse can be participating in an employer-provided retirement plan.
If you are a single or single head of household making less than $58,000 ($92,000 for married filing jointly and qualifying surviving spouses) make sure you maximize your contribution into your IRA. That's $5,000 if you are under 50; $6,000 if you are over. Depending on your tax rate, the savings are between $750 and $1,980. For higher earning with workplace retirement plans, the 2012 IRA phases out.
Making YourPremiums Deductible
You can save money by using a Health Savings Account (HSA). Here's how it works. For those who have high-deductible health insurance plans and can't be claimed as a on someone else's , an through an employer-sponsored Section 125 Cafeteria Plan can save tax dollars while providing for your medical expenses.
To be deductible, 2012 contributions must be made by April 15, 2013, into an account maintained by a bank,or insurance company. The is deducted from your paycheck and deposited into your account before withholding are computed.
If your employer doesn't have a Cafeteria Plan, contributions can be made with after-tax income to an, with these payments deducted from your on your .
Interest earned on funds roll over from one year to the next so any contributions are not forfeited.contributions grows tax-deferred is not taxed when used for eligible medical expenses. And unused
The Investing Answer: After 2012 is completed, calculate any that are due. Make a provision to pay any federal due by January 15, 2013. By doing this, if you owe $1,000 in you will avoid as much as $250 in penalties and $5 per month for each month that the tax remains unpaid. Pay any state tax due by December 31, 2012, to deduct them in 2012.
Martin R. Cantor is a certified public , has a doctorate in Education Administration and is director of the Long Island Center for Socio-Economic Policy.