With the fate of future tax breaks in Congress’ hands, this year is anything but ordinary for taxpayers. Unless Congresses reaches an agreement by December 31, nearly 90% of Americans should expect to pay higher taxes in 2013. With that in mind, it is crucial that you do everything you can to trim your tax bill this year. Here are several year-end moves you can make to help with this:
Feed your 401(k): There is still time to max out these contributions. For workers under 50, you can contribute up to $17,000 this year.
Safeguard your refund (by shrinking it): Instead of waiting around for your tax return, consider revising your Form W-4 and claiming more allowances. This will result in fewer withheld taxes.
Penalty-proof your return: If you expect to owe money when you file in April and risk receiving an underpayment penalty, consider boosting your withholding now.
Boost your 2012 income: In the past, it might have been attractive to defer discretionary income because tax rates were expected to remain the same. But this year, it may benefit you to actually accelerate discretionary income as the Medicare tax is implemented in 2013.
Convert your IRA to a Roth: If you’re afraid your tax rate will rise, it makes sense to convert to a Roth. Withdrawals from Roths are tax-free and penalty-free as long as you’re 59 ½ or older.
For more year-end tax tips, please visit Kiplinger.com.