SALINAS, Calif. -- The looming fiscal cliff has been a constant reminder for millions of taxpayers that tax return checks won't be as much as they were in the past.
"This could really create a lot of havoc. It already is going to, its just how much havoc is it going to create? That's the question," said Carlos Lopez, CEO of Lopez Tax Services.
Lopez said there are several changes expected to take place starting Tuesday. And while it may cause some headaches there is a small light at the end of tunnel.
Lopez said there are several things you can do to reduce your taxes before the new year.
First, maximize your 401K or IRA. "Look into your retirement planning to try to lock away a little extra if you can," said Lopez. He said this may be the ideal time to reduce your tax rate.
Another option, clean out your closet, garage and attic and donate what you don't need. Charity donations of over $250 can be a write off, and helps you increase your charitable contribution for 2012, that will help decrease your tax rate. Remember to always keep the receipt of your donated item.
Thirdly, for anyone who owns a house, try and make an extra interest payment now. "If you can afford it, I know it's the holidays," said Lopez.
Lopez said capital gains will increase so if you own stock that has appreciated value this may be the year to sell it.
Bottom line: "Prepay any taxable expenses this year and make sure you keep receipts," said Lopez.
For any business owners planning on purchasing equipment, doing so before the end of the year, is ideal to get a higher write off. Right now, businesses are allowed to write off up to $500,000 but that is expected to go down substantially next year.
Also, if your employer requires you to have a cell phone or they require you to pay certain expenses, its a good idea to prepay some of those now.
Experts also say if you are in your first four years of undergraduate school, to pay your January tuition by the 31st.
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