Valuable Tax Breaks

Valuable Tax Breaks

Taking advantage of valuable tax breaks is something every taxpayer wants to do. But how many really do so? Preparing and filing a tax return is a stressful and complicated endeavor. Many taxpayers are either too intimidated to look into all the available income tax breaks or too overwhelmed. But there are a ton of deductions available, so take a deep breath and review these 2012 tax breaks that can yield you a nice return come April!

-For those with a large estate, there may never be a better time than right now to give away a large chunk of it without paying taxes. In 2011 and 2012, individuals can give away as much as $5 million without having to pay anything in taxes. Contrast that to 2010, when no estate tax was in place but the gift tax exemption was just $1 million. Tax historian Joseph Thorndike said this is the friendliest environment in decades for those owning estates, and it’s tough to argue with him. There should be a sense of urgency amongst wealthy estate owners to take advantage of this valuable tax break — the gift tax for 2013 has not been established yet, but odds are it will not be nearly as charitable as it is today.

-Speaking of valuable tax breaks that may not exist in 2013, the zero percent capital gains tax must be taken advantage of this year by low-bracket taxpayers. Single filers whose taxable income is $34,500 or less and joint filers whose taxable income is $69,000 or less qualify for the zero percent capital gains tax. As with the generous estate taxes, nobody knows if the zero percent capital gains tax will still be available in 2013, so taxpayers should try and benefit from it immediately.

– For tax payers in higher brackets, the 15 percent capital gains tax will likely also not exist in 2013. This valuable 2012 tax break will come in especially handy if you’ve sold an asset-such as a building or a business-and agreed to an installment plan with the buyer. If you’re planning on entering into an installment agreement as buyer or seller, it shouldn’t be difficult to agree to terms, since interest rates are near an all-time low and will only go up as the economy improves.

-Turn a hobby into a business. As of January 2011, those who have 200 transactions totaling more than $20,000 on EBay or via credit card receipts from craft fairs will have to report that money to the IRS via a 1099-K. But if you are running a business instead of just enjoying a hobby, you’ll get valuable tax breaks not available to anyone else.

These are just a few of the income tax breaks to keep in mind as you prepare for the 2012 filing season. Valuable tax breaks can often go overlooked-make sure to meet with your accountant as soon as possible to take advantage of every deduction you’re eligible for!