The last thing most people want to think about during the end of year holidays is taxes. It is, however, important to do so. There are a couple of things you should consider at the end of the year to put yourself in a positive situation with regard to this year’s taxes and set you up for no surprises next year. All of these activities require that you be able to reasonably accurately estimate what your tax bill will be come April.
If you are going to owe taxes in April, you might want to consider increasing your charitable giving in December to lower your taxable income. If you are going to owe a lot in April, you should make sure to save a quarter of that amount each month starting in January to be able to pay that bill come April. In both cases, you should also adjust your W4 withholding to have more money taken out of your paycheck so you aren’t hit again with a nasty tax bill in 2013.
If you will be getting a refund in April, you should consider adjusting your W4 withholding to take more of your money home with you each month. For example, if your tax refund is $2,400, that works out to $200 extra per month you could be taking home instead of loaning it to the government interest free.
Any time you are considering making tax-related moves, it is a very good idea to consult with a qualified tax professional as your situation may be unique. Get on top of your taxes now to help make sure you are pointed in the right direction for 2012.
Tim and Kathryn Gerken are Financial Coaches in Newcastle, WA. They serve their community in the greater Seattle area.
I have heard many people over the years say the only reason they don’t want to pay off their mortgage is because they want to keep the tax deduction. These are people who could pay off their mortgage, but choose not to for the so-called tax advantage .They are also assuming increased risk of foreclosure by maintaining the loan. Let’s look at the numbers.
Very frequently we receive phone calls or mail requesting donations to this or that cause. Sometimes these calls are very high pressure and make you feel guilty for not supporting this “good cause”. Wouldn’t it be nice to be in a place financially to be able to give without guilt?
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