Posted: Wednesday, November 23, 2011 3:12 pm
By: Bob Willis, Special to The Press
Looking for ways to save money? I suspect we all are. Here are some Tax Tips that could help you save on 2011 and 2012 taxes:
1. IRA Charity Donation. If you are over 70 1/2 and required to take a withdrawal from your IRA, donate up to $100,000 to a qualified charity and you don’t pay any tax on the withdrawal. You cannot deduct the donation, but the tax saving often is far greater.
2. Energy Credits. You have until the end of this year to install energy-efficient windows, heating systems, insulation and make other energy efficiency improvements to your home and get a tax credit.
The tax credit is 10 percent of the material cost for up to $500 (a lifetime maximum since 2006) – or up to $200 for windows installed in 2011. It is a non-refundable credit, meaning you must owe taxes to get the credit.
3. Capital Gains. Capital gains are normally taxable when you sell something, like real property or stocks and bonds. For 2011 and 2012, if you keep your gross income within the 10 percent or 15 percent tax bracket no capital gains taxes are due.
The income limits for the 15 percent bracket in are $ 34,500 for single individuals and $69,000 for married couples filing jointly.
The brackets are projected to rise slightly in 2012. Beginning in 2011 there is also a new Form 8949 that must be completed to identify how the cost of the property you sold was determined. You must specify if you received a Form 1099B reporting the sale and if it provided the cost basis.
4. Hall Income Tax. Some Tennessee taxpayers are required to pay the “Hall tax” to the state for unearned income, typically investment interest and dividends.
The first $1,250 of Tennessee taxable income is exempted for individuals, ($2,500 for joint filers), and there has always been a total exemption for lower income seniors over 65.
But the income limits have been so low that few could benefit. For 2012, the exemptions have been increased by $10,000 to $26,200 for single taxpayers and $37,000 for married couples filing jointly. Since it is legal to file as “married filing separately” on your Tennessee tax return – even if you file a joint federal tax return, this could be a real boon to some seniors. If the gross income of one spouse can be kept below the exemption, any income by that spouse which normally would be subject to the tax is not taxed.
To take advantage of this increased exemption, you may need to change the ownership of your property or securities early in the year. Income from property jointly owned is considered as 50 percent to each spouse for tax purposes.
For additional tax saving suggestions, visit www.aarp.org/money/taxes.
Editor’s note: Bob Willis is a member of the AARP Tennessee Executive Council of volunteers and spent seven years as the Tennessee State Coordinator for the AARP Foundation’s Tax-Aide program. His is also the Chairman of the Tax-Aide National Technology Committee and is a member of the Tax-Aide National Leadership Team.