Year-end financial tips from the pros

As the calendar ticks toward Dec. 31, here are some last-minute, year-end tips recommended by financial professionals:

Do your donations: If you want a charitable deduction on this year’s taxes, you need to write that donation check by Dec. 31. Donations made on a credit card by Dec. 31 are deductible for 2012, even if you pay the Visa bill in 2013, the Internal Revenue Service says. A gift by check also counts for 2012, as long it’s mailed in December. Gifts to individuals — friends, family or strangers — are not deductible.

Max out the 401(k): It’s a gift to yourself — a little more retirement cushion. If you haven’t maxed out the annual contribution to your 401(k) at work, do so now. For 2012, the annual contribution limit is $17,000; next year, the annual limit goes up to $17,500. If you’re over age 50, you can make an additional catch-up contribution this year of $5,500.

Ditto for your IRA: To boost your retirement savings, don’t forget your IRA contributions. In 2012, the maximum contribution to IRAs and Roth IRAs is the smaller of $5,000 or your taxable compensation for the year. For those age 50 or older, the limit is $6,000.

If you’re not covered by a retirement plan at work, you can get a full tax deduction for IRA contributions. If covered by an employer’s retirement plan, you can take a deduction up to certain income limits (i.e. no deduction is allowed for married couples filing jointly with incomes above $112,000).

‘Moving’ donations: If you’re donating a car, boat or plane to a charitable organization at year-end, the IRS reminds that you can only deduct the fair market amount when the car is sold by the charity. This applies to vehicle deductions valued at $500 or more.

Spend those FSA dollars: If you have a Flexible Spending Account at work to cover health/dependent care costs, now’s the time to make sure you’ve spent all those tax-free dollars you squirreled away. Since FSA accounts are use-it-or-lose-it, you don’t want to let that money slip away. And once you’ve spent those dollars, you’ll still need to file claims through your employer’s health plan to get reimbursed.

For dependent care (such as child care or adult day care), the deadline to incur expenses is Dec. 31. For health care expenses, many employers offer a grace period through the first part of 2013. Check with your employer’s health care plan for deadlines on incurring expenses and filing claims.

And note: Not everything you buy is reimbursable as a health care expense. For instance, all over-the-counter medicines, including painkillers, require a doctor’s prescription. For a detailed list, go to IRS.gov or your health care provider’s website.

Prepare the paper: Now’s a good time to start gathering the paperwork for filing your 2012 taxes. Even if it’s simply tossing the paperwork into a shoebox, start collecting proof of income (pay stubs, 1099s, W-2s) and proof of deductions/donations (charitable receipts, canceled checks, credit card statements, payroll deductions).

Whether you use a professional tax preparer or do your taxes yourself, getting organized now can save some headaches down the road.

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