Still a little time to save on 2012 tax bills before some deductions go away
WILLMAR — There’s still time for individuals and small businesses to save a little on their 2012 tax bills.
John O. Christianson, managing partner of the Christianson and Associates accounting firm in Willmar, said Wednesday that individuals can do reasonably simple things like making an extra house payment, maximizing retirement contributions, or increasing charitable deductions. Businesses can take advantage of deductions for equipment.
The impending fiscal cliff, which could result in federal tax increases and massive budget cuts in the new year, has left taxpayers and tax preparers with uncertainty about what lies ahead.
But for this year, an extra house payment could give an individual taxpayer an extra month’s interest to deduct on a 2012 tax return, Christianson said. Charitable contributions are deductible for this year, too.
Some other suggestions, from a news release from H&R Block, include paying spring college tuition early to get the full American Opportunity Credit which expires at the end of the year. Another suggestion is to make maximum deductible contributions to retirement plans.
Christianson said he’s done a series of seminars on the fiscal cliff for local businesspeople. He called it “a perfect storm of policy” that will affect everyone in one way or another. “A lot of things are unsettled with taxes,” he said.
Since state taxes can still be deducted on federal tax returns, people who know they will owe state taxes for 2012 could pay them before the end of the year, too, he said.
Many proposals have been discussed between Congress and the White House, he said, but at this point, no one really knows what the final decisions will be. There has been discussion of limiting some personal deductions on federal tax returns.
“Under no circumstances do we see taxes going lower in 2013,” he said, but specifics about deductions and other tax changes just aren’t clear yet.
Some other concerns for individual taxpayers involve taking advantage of lower rates this year for long-term capital gains. The tax rate on capital gains could be increasing next year, depending on fiscal cliff negotiations, he said.
If Congress does not approve a fix for the Alternative Minimum Tax, up to 60 million people could be subjected to the tax. The tax was originally intended to make sure higher-income people paid a minimum amount of taxes.
Congress has consistently implemented a patch to adjust the income limit for inflation. If there’s no new patch approved for 2012, many middle-income taxpayers could be affected by the original 30-year-old income guidelines.
Small businesses can consider making some last-minute equipment purchases, Christianson said. Businesses are allowed to write off up to $139,000 purchases in equipment and vehicles in 2012. In 2013, that drops to $25,000 due to the expiration of a long-time economic incentive.
Business are also dealing with uncertainty regarding other tax laws, and regarding things like payroll deductions on employees’ paychecks, Christianson said. Some things, like a research and development credit, have been in place for many years, but they are expiring. At this point, no one knows if they will be extended or if the extensions will be retroactive to the beginning of 2013.