FIDELITY VIEWPOINTS®
Savvy year-end tax moves to consider now
Smart Giving Solutions in Uncertain Tax Times
Strategy #3: Accelerate income to take advantage of today's tax rates
Adjusting the amount of income you receive this year and next may also help you manage your taxes.
For example, if you are able to accelerate any of your deferred income or take an early bonus before the end of 2012, rather than waiting until next year, you will pay taxes at the current income tax rates rather than at the higher rates that are scheduled to go into effect next year.
Similarly, if you're planning to convert a traditional individual retirement account (IRA) to a Roth IRA to take advantage of the Roth's income-tax-free withdrawals (and other benefits) in 2012, making a charitable deduction may offset the increased income tax from the conversion.
Steps you might take now:
If you plan to accelerate income or convert to a Roth IRA this year, consider also increasing your planned charitable contributions in 2012 as well. The extra tax deduction from your donations may help offset the increase in your taxable income.
In addition, if the charitable donation is made to a public charity offering a donor-advised fund program, you'll be able to use your donation to support all of your favorite causes at any time.
To learn more:
See how a charitable donation may minimize the tax impact of a Roth conversion.
Information provided is general and educational in nature, and should not be construed as legal or tax advice. Fidelity Charitable does not provide legal or tax advice. Content provided relates to taxation at the federal level only, and availability of certain federal income tax deductions may depend on whether you itemize deductions. Rules and regulations regarding tax deductions for charitable giving vary at the state level, and laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy or completeness of the information provided. Charitable contributions of capital gain property held for more than one year are usually deductible at fair market value. Deductions for capital gain property held for one year or less are usually limited to cost basis. Consult an attorney or tax advisor regarding your specific legal or tax situation.