Did the New Year sneak up on you? Were you too busy over the holidays to do any year-end tax planning? If so, don't worry! There are a few things you might still be able to do to reduce your 2012 tax bill.
Contribute to a Traditional IRA
One of the easiest tax deductions you can still take for last year is to contribute to a Traditional Individual Retirement Account (IRA). To claim an IRA deduction for 2012 you need to make the contribution by April 15th and designate it is a “prior-year contribution” when you deposit the money.
(Note that you could contribute to a Roth IRA instead of a
Traditional IRA, but you don't get tax deductions for Roth
contributions. You can learn more about IRAs here.)
The maximum contribution for 2012 is $5,000, or $6,000 if you’re over 50, as long as you had at least this amount of earned income for 2012. Keep in mind that your ability to deduct the contribution will depend on things like your filing status, whether you have a retirement plan at work, and your income level.
Contribute to a Health Savings Account (HSA)
If you have a high deductible health insurance plan you might be eligible to contribute to a health savings account, or HSA. Contributions are tax-deductible, money inside an HSA isn’t subject to taxes, and withdrawals are tax-free if they are for qualified medical expenses. Your HSA account balance can be rolled over to future years to save for future expenses.
For 2012, individuals can contribute up to $3,100 and families can contribute up to $6,250. You can contribute an extra $1,000 if you’re age 55 or older. Just like IRA contributions, contributions to HSAs for the 2012 tax year must be made by April 15.
Contribute to a SEP IRA
If you’re a business owner, there is still time to set up and fund a Simplified Employee Pension (SEP) IRA. The maximum
contribution for 2012 is 25% of your wages up to a maximum contribution of $50,000, so this has the potential to be a huge deduction.
If you have employees you have to contribute the
same percentage to their SEP IRAs as you contribute to yours, so keep this in mind when deciding how much to contribute. Contributions to SEP IRAs must be made by your tax-filing deadline including extensions, so you could potentially have up until October 15, 2013 to take this deduction on your 2012 tax return.
To learn more about our company - and find out how we are different from other financial advisors - visit www.VannoyAdvisoryGroup.com or call us at (210) 587-6433.
