Tax time may not be until April, but now is the time to start getting your tax plan in order. There are decisions to be made, for sure, like, charitable donations, making big purchases — or not — and most of all, sorting out all the paperwork you’ll need for filing your return. And of course, putting it where you can find it. It’s a chore many of us put off ’til the last minute, and this year is probably no different. But this year — with the fiscal cliff hanging over all our heads — this year’s tax prep takes on a special meaning.
Financial expert Louis Barajas joins guest host Tony Cox with some tax tips and answer a few of your questions.
Andrew just moved to Manhattan, N.Y., from San Antonio, Texas, for love. He left his job (and is now unemployed), sold his car and wonders how that will affect his tax burden.
“You actually went from one of the lowest places where you are going to pay taxes because the state of Texas does not have a state tax return and now you’ve moved to New York and the surprise is going to be not that you’re just going to have to pay state taxes, but you’re also going to have to pay city taxes, or they call them boroughs out there,” says Barajas. “Technically, if you’re going to find another job within the same industry that you’re in, you are going to have deductions for moving, the travel expenses, the moving of your furniture, lodging expenses, except for meals. You don’t get meals. But if you’re going to go in a different industry, most likely you’re not going to be able to take that deduction.”
Barajas says Andrew can potentially take another deduction — job hunting or job search expenses. He suggests Andrew talk to a tax preparer.
Olivia from Cincinnati experienced a tough loss last year when her father-in-law passed away. At his memorial service, she and her husband set up a 529 plan (a college savings account that is tax deferred) for her 8-year-old brother-in-law, which required a $3,000 minimum to establish. She’s seeking advice on her gift.
“Whenever you gift something to someone, people think that you can take a tax deduction for it, but you can’t actually. And the person who receives the gift doesn’t have to claim it as taxable income to them,” says Barajas. “Technically you’ll hear that if you give money to someone — for 2012 it’s going to be $13,000. If you give you more than $13,000 to a child, let’s say you did, you must file a gift tax return. Now the gift tax return is just for informational purposes only.”
Barajas says that Olivia can gift up to $13,000 and not worry about any reporting.
For more advice on taxes and getting ready for the end of the year, click on the audio player above.