As a new year approaches, you can still make
some tax-related moves to improve your bottom line in 2013.
Start by stashing away $2,000 toward retirement savings in 2012 and get a tax break for part of that contribution. The so-called saver’s credit allows low- and moderate-income workers to offset part of the first $2,000 that they contribute to IRAs, 401(k) and other similar workplace retirement plans.
Workers in private companies have until April 15, 2013, to contribute to a plan or to set up a new retirement plan and still get a tax credit for 2012. Government and other public employees, however, must make their contributions to retirement plans by the end of this year.
Taking the credit is a no-brainer: It could either increase the size of your refund or reduce the amount of taxes you owe.
A quick list of who may be eligible for the saver’s credit:
- Married couples filing jointly with incomes of up to $57,500 in 2012 or $59,000 in 2013
- Heads of household with incomes of up to $43,125 in 2012 or $44,250 in 2013
- Single taxpayers with incomes of up to $28,750 in 2012 or $29,500 in 2013
To motivate you to save, the IRS wants you to know that in tax-year 2010, the most recent year for which figures are available, 6.1 million tax returns claimed $1 billion in saver’s credits. For joint filers, the credit averaged $204; for heads of household, $165; for single filers, $122.
Next up, medical expenses. If you need a medical or dental procedure in 2013, or if you have other unpaid medical bills, you may want to pay for it before the end of 2012. That’s because the medical deductions you’re allowed to take in 2012 will rise significantly next year. It’ll be easier for you to meet that threshold in 2012, when medical expenses must exceed 7.5 percent of your income. Next year, that threshold will increase to 10 percent of your income if you’re under age 65. For those 65-plus, the amount you can take remains at 7.5 percent.
Don’t forget about donating items or giving money to charitable organizations. Though the new year is just days away, it’s not too late to make charitable contributions that you can write off for 2012.
Photo credit: Andrea Travillian via flickr.com