Taxes: Read This To Be Ready for 2012!

O.K. ladies you have one more day to (April 17) to stash some more cash into a traditional IRA, but otherwise, let’s hope you’ve got your 2011 taxes done and filed. We’ve asked around to cull the best tips for you for next year … and chose five tips from Women’s Day’s recent article, 10 Savy Tax Tips for 2012.

Keep track of all job-searching expenses 

Save receipts from your job hunt in a safe place, because you may be able to deduct certain expenses. The requirements: You should be looking for a position in your current occupation, and there can’t have been too much of a break since your last job. (So if you took a year off for school, say, you can’t deduct the costs of your employment search afterward.) “You can deduct expenses from traveling to and from interviews, staying in hotels, mailing resumes, making copies and hiring a headhunter,” says Josh Barger, vice president of tax services for Foundation Financial Group in Jacksonville, FL. The catch: You can deduct only expenses that exceed 2% of your adjusted gross income. But if you’re traveling heavily—or are unemployed and not making much—it may work. And if you move more than 50 miles away for a new job, keep receipts for mileage, movers and hotel costs. You don’t even have to meet the 2% threshold to deduct them.

Adjust your withholding

Did you get a huge check back from last year’s taxes? That’s not as great a thing as you’d think—you’re essentially making an interest-free loan to the government. “Many people get large refunds because too much is subtracted from their salaries,” says Julian Block, a tax attorney in Larchmont, NY. “Some people do this to force them to save money, but most people do it because they don’t know any better.” Use the IRS’s Withholding Calculator to determine whether you should fill out a new W-4 form for your employer. Christi Lardy did this last year, after she bought a house in Portland, OR. “Getting into the house cost more than I projected,” she admits. “I changed my withholding so I got more during the year to pay bills.”

Max out your 401(k) contributions

Want to save on taxes? The more money you put into tax-deferred accounts, like a 401(k), the less you’ll have to pay Uncle Sam come April. At the very least, contribute enough to get your full employer match, if there is one. “That’s free money that your employer is giving you, so take advantage,” suggests Craig Harris, manager of the national tax department for Liberty Tax Service.

Value your charitable donations

The next time you drop off a bag of old clothes at your local Goodwill, catalogue its contents. “And don’t just guess at the value of the goods,” says Fran Coet, a CPA in Westminster, CO. Use a valuation guide from Goodwill or the Salvation Army to put a dollar figure on your donation—you might be surprised by what it’s all worth. If you’re using your car to travel to and from a donation center, don’t forget to deduct mileage at 14 cents per mile. Learn more about getting the most of your charitable tax deductions, plus find out the best places to donate.

Keep records of tuition payments

If you’re currently in college, look into the American Opportunity Tax Credit. “You can receive credit for up to 100% of the first $2,000 in expenses, fees and tuition, and 25% of the next $2,000 in education expenses,” says John Hewitt, CEO of Liberty Tax Service. It can be claimed for the first four full years of college education—per student. If you or your children aren’t eligible, you may instead be able to take the Lifetime Learning Credit, which can refund you up to $2,000 for qualified education expenses. If you think either credit applies to you, keep receipts and documentation for tuition, fees and required course materials. You can actually get a credit on your 2011 taxes if you paid tuition or other qualified expenses last year, as long as you have the right paperwork. Schools will typically send you a 1098-T tax form for tuition and fees paid, but receipts for books and other required materials are up to you to provide.

Sell your winners

This could be the year to offload long-term investments that have gone up in value. “We have a very low capital gains rate now,” says Jackie Perlman, principal analyst of the Tax Institute at H&R Block. “But those rates are scheduled to shoot up in 2013.” More specifically, you’ll pay a maximum rate of 15% on long-term capital gains this year, but as much as 20% next year. And if you’re in one of the bottom two tax brackets, your rate will go from 0% to 10%.

Use your flexible spending account (or sign up for one)

Many employers offer flexible spending accounts (FSAs) that allow you to use pre-tax money to pay for healthcare and childcare expenses. If you’re participating this year, make sure you spend everything in it—FSAs are use-it-or-lose-it accounts, so you’ll be out any cash you didn’t claim by December 31st (or March 15, 2013 at many companies). Even though FSAs are limited to prescription-only drugs—no over-the-counter items without a doctor’s note—there are ways around this. “I asked my acupuncturist to write a prescription for over-the-counter supplements so I could submit the expenses through my FSA,” says Denise Winston of Bakersfield, CA. “I just explained what I needed and asked her to do the paperwork. This nets a savings of about $400 per year.” If you’re not signed up, make sure you opt in for 2013 during your company’s open enrollment period, which is usually in the fall. Benefits won’t start until January 1, 2013, but then you can pay for up to $5,000 in childcare costs and $2,500 in medical costs with pre-tax cash.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: