How to Reduce Tax Bill Now Before Rates Go UpPosted by in Blog on October 15, 2012
Many people, not just those in the high income brackets, could potentially be paying more in taxes next year. Rick Rodgers, a financial planner, tells FinancialPlanning.com about some tax breaks you may be able to claim now, before they go away.
One thing he suggests is to convert your traditional IRA into a Roth IRA, taking the tax hit now instead of a potentially higher tax bill in the future. There is also a safety net built into this. Rodgers says that if Congress passes a big tax reform bill, you will have until October 15, 2013 to reverse the switch.
Another idea Rodgers has is to sell items now that could face capital gains taxes in the future, or higher such taxes if the current tax laws expire without being renewed.
In addition, if you have looming medical expenses, you may want to get them done in 2012. Currently, any expenses above 7.5% of your adjusted gross income are deductible. Next year, only those medical expenses above 10% will be deductible. That means that you may want to make medical payments early, and take care of eye exams and dental exams now.
Written by Lisa Swan