Tax tips for 2012

Tax time is quickly approaching and it could pay to do a little research and planning before the year ends. TurboTax posted some helpful tips in an article, Nine Things to Do Now to Cash In at Tax Time, to help minimize tax bills. Some of their strategies could help to reduce costs for 2012 tax filings and some could continue to be a benefit for years to come.

Contributing to an Individual Retirement Account (IRA) assists people once they retire, but it also reduces current tax bills. The article states that for 2012, the maximum tax-deductible contribution to an IRA is $5,000 and $6,000 for those who are 50 or older. As long as the IRA is opened before December 31, 2012, contributions made until April 15, 2013 can be deducted.

Some energy-saving home improvements can qualify for a tax credit of up to 30% of the costs associated with the improvements. For more information on which improvements meet the federal energy-efficient standards, please visit www.EnergyStar.gov.

The article also suggests giving to charity to help reduce a tax bill. The gifts can be cash, stocks or something like a vehicle. The Internal Revenue Service (IRS) has details and links for the necessary forms for making those deductions at: http://www.irs.gov/taxtopics/tc506.html.

There are ways to benefit not only on Federal taxes, but State, as well. Contributing to a 529 College Savings Plan for a child or grandchild can reduce tax costs. Earnings in 529 plans are not subject to federal tax, and in most cases, state tax, as long as withdrawals are used for eligible college expenses, such as tuition and room and board. There are two types of 529 plans: pre-paid tuition plans and college savings plans. All fifty states and the District of Columbia sponsor at least one type of 529 plan. In addition, a group of private colleges and universities sponsor a pre-paid tuition plan. The Securities and Exchange Commission defines 529 plans here.

For even more tips for 2012 taxes, Bankrate.com published an article titled, 12 tempting tax tips for 2012. Bankrate.com has suggestions such as making sure to remember the American Opportunity Tax Credit, which is an education tax break that provides a credit of up to $2500 of the cost of qualified tuition and related expenses. Up to $1000 of that education credit could be refunded to the tax payer.

Sometimes tax law can be confusing, so hiring a reputable tax preparer could be quite beneficial. Always check a tax professional's Internal Revenue Service registration status before allowing someone to take a look at any documents. The IRS posted an article on their site about what to keep in mind when choosing a tax preparer and that article can be found at: http://www.irs.gov/uac/Points-to-Keep-in-Mind-When-Choosing-A-Tax-Preparer.