You have opportunities to reduce your 2012 federal income tax bill. Here’s a grab bag of suggestions:
1. Plan for the AMT. The annual exemption may change, but the usual triggers – items that can create alternative minimum tax liability such as certain large deductions – are the same.
2. Education incentives. Pre-paying qualifying expenses for the first semester of 2013 can get you a larger credit or deduction.
3. Family gifts. Take advantage of the expiring $5.12 million lifetime gift exclusion by sharing the wealth – and the tax burden – with lower-bracket family members.
4. Deferred plans. Maximize contributions to retirement plans such as your 401(k) or IRA, and fund other tax-favored accounts, such as health savings accounts.
5. Charitable contributions. Gifts to qualified charities made on your credit card by Dec. 31 qualify for a deduction this year, even though you’ll receive the credit card statement in January.
6. Itemized vs. standard deduction. Shift expenses such as property taxes between years to “bunch” deductions and get the most tax benefit.
7. Disaster relief. Check for a potential refund and consider amending your 2011 return to claim your loss if you live in a federally declared disaster area.
8. Investment cost basis. Understand your cost basis choices before capturing capital gains or losses, especially when selling mutual funds.
9. Temporary depreciation deductions. Assets purchased for your business or rental property before year-end may qualify for accelerated depreciation methods that are to expire Dec. 31.
10. Kiddie tax. Instead of transferring assets to your children to save for future education expenses, consider contributing to a 529 plan, which can limit exposure to “kiddie” tax on unearned income.
Thomas R. Seitz is a certified public accountant with Wessel & Co. of Johnstown.