Tip: If you are planning to sell, it may pay to sell before the end of 2012. If you plan to sell your primary home at a gain, you may be hit with a high profit sales tax after 2012 that can trigger a special 3.8% Medicare surtax. Starting in 2013, the new health care law imposes a 3.8% levy on investment income of singles with AGI over $200,000 and marrieds above $250,000. (Also note that the surtax is harsher on the sales of second homes after 2012.)
"Making Work Pay" Credit is Going Away but....
For 2011, the 6.2% tax rate for the employee portion of Social Security tax declined to 4.2%. This is a tax savings of up to $2,136 per filer - and it replaces the Making Work Pay Credit which provided a maximum tax saving of $400 for single filers and $800 for couples. Tip: Analyze the benefits of taking that 2% tax savings and putting it towards retirement savings plan or debt reduction instead.
Contributions to a state-sponsored Section 529 college savings plan or to a Coverdell Education savings account can earn returns that are tax free when used to pay education costs. Also, up to $5,250 received from an employer's qualified education assistance plan can be taken tax free when used to pay for an employee's education.
Loophole: Donate Appreciated Stock Instead of Cash
You can save tax dollars by donating appreciated long-term stock and giving it to your favorite charity in lieu of cash. When you do this, you can deduct the full fair market value of the shares and owe no capital gains tax on the stock's buildup in value since the original purchase.