Our Bay Area readers are no doubt aware that the national election is just days away and depending upon who wins the Presidency, there may be changes in personal income tax deductions. If fact, no matter who wins there may be changes to the income tax code. So what are we all to do?
According to financial sources, it may be a good idea to accelerate large write-offs as well as income before any changes are made to income tax law. As a practical matter, this means taking a look at your deductions.
Not everyone itemizes their deductions. The Tax Policy Center in Washington reports that 12 percent of taxpayers making $63,000 or less itemize their deductions compared to 90 percent of taxpayers making $150,000 or more.
The largest income tax deductions for most of us are home mortgage interest, employer-provided health insurance and retirement contributions. Another important deduction is the charitable donation deduction which is currently unlimited.
Those who are concerned about minimizing their tax liability may want to consider the following:
- Accelerate state income and property tax payments
- Pay medical-insurance premiums or other deductible costs ahead of time
- Make any planned large purchases in 2012 so state sales tax can be deducted, if the purchase can pass the 7.5 percent hurdle
- Make significant charitable contributions
At this point in time we do not know what will happen to either the tax rates or the tax deductions for next year. In either case, it is always good advice to work with experienced professionals when planning a tax strategy for now and for the future.
Source: Wall Street Journal, “Protecting Your Deductions,” Laura Saunders, Oct. 12, 2012
- At our San Francisco law office, we represent clients with tax issues including those dealing with IRS issues such as tax returns, IRS audits, charitable gifting and other tax compliance issues.