Wednesday, November 21, 2012

2012 Year End Tax Savers

College savings. Some states allow state income tax deductions for contributions to Section 529 college savings plans. If your state does, and you’re planning to send a child to college, consider making one.

Individual retirement accounts. Convert a traditional IRA to a Roth IRA to obtain future tax-free investment returns from the Roth IRA while escaping minimum annual distribution requirements. Added benefit: You can reconsider and reverse the conversion if you later decide it is not in your best interest or that you can make the conversion at a lower tax cost later if the value of your account had dropped – as late as October 15, 2013. You may reverse a conversion only once in a single year.

Capital losses. Take capital losses to end up with a $3,000 net loss for the year. A loss of up to that amount is deductible against ordinary income.

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