Year-End Planning With PlasticDecember 17, 2012
Be it the result of crazy holiday shopping or just the sluggish economy, many of us this time of year are a little strapped for cash. And as we sit helplessly waiting for Congress and the President to do something about the fiscal cliff, most plain old taxpayers are looking for anything they can do, before year-end, to help reduce their potential 2012 tax liability.
Well here’s a thought: have you ever considered charging on your bank credit card such deductions as charitable contributions or medical expenses? The IRS has issued a couple of rulings (Rev Rule 78-38 and Rev Rule 78-39) that state that charitable contributions or medical expenses charged on a bank credit card are deductable in the year charged regardless of when the bank is repaid.
Therefore, those of you who can still use the deduction in 2012 and have a charitable inclination, but no available cash, can charge the contributions before year-end. The contribution can be deducted on your 2012 return, even though the credit card company won’t be repaid until next year or even thereafter.
And what about that colonoscopy or root canal that you’ve been putting off? Before year-end, do it, charge it and you’ve killed two birds with one stone. And not only that, think of the mileage you’ll get.
So take advantage of this IRS sanctioned loophole. Being short of cash is nothing to be ashamed of. For as Marshall McLuhan said; “Money is just the poor man’s credit card.”
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Pursuant to requirements related to practice before the Internal Revenue Service, any tax advice contained in this communication (including attachments) is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.
Information contained herein is accurate at the time of publication. We recommend that you consult with your FR&R advisor before implementing any action.
© 2012 Frost, Ruttenberg & Rothblatt, P.C.