Cha-ching! Cha-ching! Cha-ching!

Let’s get ready for the 2012 tax year!

It is a good time now to start thinking about few areas that can save you money in 2012 tax time.

Let’s start with the simplest one of all, open an individual retirement account or contribute to an existing one. If you are in the 20% tax bracket, the maximum contribution of $5,000 can save you up to $1,000 in tax liabilities.

Donate to qualifying charities organizations and get dollar for dollar deduction for your good deed. Make sure that you are keeping good record for these donations. If you are in the 20% tax bracket, a $500 charitable donation can save you up to $100 in tax savings. Note however, that in order to take advantage of charitable donation you must itemize your donation on your Schedule A.

Holding stocks for more than a year will prove as a smart decision in 2012. Holding your stocks for more than a year will reduce your tax on your gains. For taxpayers in the 15% bracket and lower, this is your last year to pay no tax on long-term gains.

Invest in Municipal Bond for tax free gain. If your tax bracket is high enough the tax savings will outweigh the lower rate of returns. If you reach an age of 70-1/2 you must begin taking distributions from your qualified retirement account (IRA accounts, 401ks, 457 plans or other tax-deferred retirement savings plans like a TSA, SEP or SIMPLE). This is called a Required Minimum Distribution, often referred to as an RMD. The penalties of not taking distribution on time are 50% of the amount not withdrawn on time.

Take advantage of a tax advantage HSA account if your employer offers it or if you need to purchase individual/family coverage. The contribution to that account is not subject to federal income tax. The funds will roll over from year to year as long as you own the account and use it for medical expenses. If you are in the 20% bracket, you can save up to $ 620 each year if you contribute the limit allowed of $3,100.

With the economy in flux and more adults than ever heading back to school for retraining, you may want to consider setting up a 529 plan for yourself in addition to, or instead of, one for your young children. The 529 plan does not discriminate base on age. If you think you want to advance your education in the next few years then this is a good choice for you. This tax advantage will not save tax dollars on your tax current return but the money contributed to this plan can grow tax free and can be cashed with no tax liabilities. The best thing about this finds is that they are transferable from family member to another as long as it is use for higher education. These plans are permanent by Congress so their future is tax-free indefinitely.

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