Clothing sorters Ya Ma, left, and Elvira Chanacua work their way through clothing donations at the Gresham Goodwill Store in 2007.
The fiscal cliff that's smoothed into a slope that's really a long bunch of descending Mount Hood-like crags has displaced the election as the dominant media murmur. And I'm here to say little about it.
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Yes, it stirs much uncertainty. Yes, the spending cuts and tax hikes, if allowed to take effect, will sock each and every one of you to varying and surprising degrees. But, no, I have absolutely no idea what Congress and the president will do.
Besides, a number of tax changes kick in Jan. 1 regardless of what transpires at the precipice. For now let's focus on these, as well as other year-end moves you can make to save yourself on taxes for 2012.
Teachers, Washingtonians, Portland landlords and wealthy taxpayers, take note.
Donate and document:
If you itemize deductions you have until Dec. 31 to make donations and claim them for the 2012 tax year.
Be sure to keep accurate records. The Internal Revenue Service and U.S. Tax Court have become sticklers for documentation, said Raymond Rowntree, a certified financial planner and owner of Rowntree Tax Consulting in Portland.
"This bites a lot of people," Rowntree said. "Taxpayers lose time and time again when they don't have (records)."
Basically, for any donation below $250, keep a bank record. For anything above $250, get an acknowledgment letter, correctly worded.
Churches, nonprofits and donors beware: If the letter fails to indicate that the donors received "no goods or services" in exchange for their donation the IRS could disallow the deduction.
Just ask David and Veronda Durden of Texas, who
. The acknowledgment from their church did not specifically state that no goods or services had been provided in exchange for their $22,517 in contributions, most of which came via checks greater than $250.
The IRS sought back taxes from the Durdens of $7,500, plus an accuracy-related penalty of $1,500. Ooof!
Give to Oregon IDA Initiative:
For 13 years, Oregon individual development accounts have helped 2,400 lower-income Oregonians learn how to budget and save for college, a small business or their first home. Another 2,400 are in the program now, spokeswoman Alison McIntosh said.
Donors get a lucrative credit on their Oregon return worth 75 percent of their gift, and gifts can be as large as $100,000 a year.
Neighborhood Partnerships, the nonprofit that manages the program, gladly accepts donations of stock or shares of mutual funds. But please get them in by Dec. 15. The nonprofit needs time to acquire and sell the stock by year's end, McIntosh said.
So far, $7.3 million in credits remain for 2012, but that will change quickly this month. Donate at oregonidainitiative.org.
Deducting medical expenses:
Got a lot of medical bills and more doctors to see? Get those appointments in now. An already high hurdle is about to get higher.
Currently taxpayers must spend 7.5 percent of their adjusted gross income on medical and dental costs before they can itemize them as deductions. Next year they'll have to spend 10 percent, a tax hike to help pay for the health care law.
Those age 65 or older won't see this increase until 2017, however.
Don't forget: Oregon allows taxpayers age 62 and older to deduct from income the health expenses they can't claim on the federal form. About 245,000 claimed Oregon's "special medical deduction" in 2010, according to the state Department of Revenue, and that perk won't change.
New payroll and investment taxes for big earners:
Come Jan. 1 most workers earning more than $200,000 and couples making more than $250,000 will see more deducted from their paychecks. Their Medicare tax on wages will increase from 1.45 percent to 2.35 percent.
There are some potential pitfalls here, Rowntree warns. For example, a couple making $150,000 each won't have the tax withheld from their checks. But since they make more than $250,000 together, they'll be liable for the tax on their return. Plan accordingly.
The same individuals and couples also will see a new 3.8 percent tax in 2013 on net investment income. That includes interest, dividends, capital gains, royalties, rents and income from a business involving passive activities. But this tax doesn't apply to investment income inside a 401(k), individual retirement account or other tax-deferred retirement vehicle.
Also, the tax applies only to income above the $200,000 and $250,000 thresholds. So a couple earning $200,000 in wages and $100,000 in investment income will have $50,000 subject to the 3.8 percent tax.
If this hits you and you've not already done so, talk to your tax adviser or financial planner about strategies for blunting these hikes.
Portland landlords look out:
Previously, Portland and Multnomah County exempted landlords with fewer than 10 residential rentals and no other commercial activities from paying business taxes.
. Starting with 2012 returns due April 15, more landlords will be subject to Portland's minimum tax of $100, or 2.2 percent of adjusted net income.
Landlords with less than $50,000 a year in gross receipts are still exempt from the tax. But oddly, that includes revenue from rentals owned anywhere, not just in Portland or the county, city Audit Supervisor Scott Karter said.
The change will most likely snare 1,800 new taxpayers, according to city estimates. Proceeds will pay for
.
Macy's at Westfield Vancouver (Wash.) Shopping Mall.
No sales-tax break for Washington residents:
That's right. Congress used to allow taxpayers in states without an income tax (Washington) to
That break expired with 2011 and won't come back unless it's part of the fiscal cliff patch.
No tax recess for teachers:
Congress last year also let expire the
for unreimbursed classroom expenses. In 2010, nearly 34,000 Oregonians claimed $8 million in such deductions, according to
.
Tuition deduction:
Yep, with college costs still climbing, Congress let lapse the above-the-line deduction for tuition, books and other related college expenses at the end of last year. The break benefited 2 million taxpayers with $80,000 in income or less ($160,000 for joint filers). Fortunately, the American Opportunity and Lifetime Learning credits (
) survived.
Some relief:
It's not all bad news. Portions of voter-approved state tax hikes -- Measures 66 and 67 --
.
That means Oregon's top income tax rate drops slightly for the 2012 tax year, from a high of 11 percent to 9.9 percent. That's for singles with more than $125,000 in taxable income or joint filers with more than $250,000.
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welcomes questions about his column or blog. Reach him at 503-221-8359. Follow It's Only Money on
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