The fiscal cliff: Calculate how much it will cost you

There's still no deal to prevent the double-whammy of harsh tax hikes and spending cuts kicking in on Jan. 1. Who will feel the most pain if we take the plunge?
After several days of apparent progress, negotiations on a deal to avoid the fiscal cliff stalled on Wednesday. House Speaker John Boehner, the lead negotiator for Republicans, is vowing to hold a vote on his own plan to raise taxes on people earning over $1 million a year, sparing most Americans from the loss of Bush-era tax hikes but leaving in place deep, potentially damaging automatic spending cuts due to hit at year's end. President Obama has threatened to veto Boehner's bill, known as Plan B, although it appears dead-on-arrival in the Democrat-controlled Senate. Obama said the GOP was refusing to strike a compromise due to a grudge against him, and he challenged Republicans to "peel off the war paint" and make a deal on a 10-year, $2 trillion deficit-cutting agreement to avoid the cliff. Each day without an agreement, though, increases the chance that the fiscal cliff will actually hit. Economists have warned that could trigger another recession. How would going over the cliff affect ordinary Americans? Here, a brief guide:
Would the fiscal cliff cause instant calamity?
Many people might panic right away if Jan. 1 arrives without a deal, but the real impact of the fiscal cliff will occur gradually as $600 billion in automatic tax hikes and spending cuts (mostly to defense and domestic spending programs) start kicking in. But the money won't be sucked immediately out of the economy. It will happen over the course of the year, although we'll all feel the pinch right away.
SEE MORE: America already drove over a fiscal cliff
Where will we notice?
The first place most people will feel the pain is when they receive their first 2013 pay stub. Without a deal, the temporary reduction in the Social Security deduction — from 6.2 percent of pay to 4.2 percent — that was part of the economic stimulus package, will expire. The payroll tax will return to normal, and that extra 2 percent (of income up to $82,000) will go into the Social Security system, instead of your pocket. That will add up to $1,640 per taxpayer over the course of the year.
What about income taxes?
There, too, everyone will notice, although not everyone will suffer equally. The temporary tax cuts that then-president George W. Bush signed into law in 2001 and 2003 are set to expire for people at all income levels on Jan. 1. For married couples filing jointly, the rate will jump from 10 percent to 15 percent on the first $17,800 of adjusted gross income, it will remain at 15 percent on income from $17,800 to $60,350, and it will rise from 15 percent to 28 percent on income from $60,350 to $72,300. The taxes on a family making $80,000 will rise from 25 percent to 28 percent. Also, the standard deduction for married couples will fall from $12,100 to $10,150, and the child tax credit will fall from a maximum of $1,000 per kid to $500.
SEE MORE: Could Obama sidestep a debt-ceiling showdown by minting $1 trillion coins?
How much will that cost the average person?
It depends on how much he or she makes. The nonpartisan Tax Policy Center estimates that if all of the scheduled tax increases are imposed, the average household will pay an extra $3,400 next year. The lowest fifth of households, with $11,239 in income, will pay an extra $412. The middle fifth, with an average income of $49,842, will pay $1,984 more. The second highest fifth (average income $80,080) will pay $3,540 more. The highest fifth (average income of $178,020) will pay an extra $14,173. The top 1 percent of taxpayers, those making $1.3 million on average, will see their tax bills rise by $120,537. That means that, in dollar terms, the super wealthy will pay the most, but those closer to the middle — say, couples making $80,000 — will lose the biggest chunk of their income.
So that's how much more we'll pay if there's no deal?
Not necessarily. Even if there's no deal to avoid every element of the fiscal cliff, there's a chance Congress will pass some form of a deal to ease the pain, at least for some of us. Boehner's bill would preserve the Bush-era tax cuts for almost everybody. Obama's proposal would keep those lower tax rates in effect for households making under $250,000 (which is still almost everybody). It's confusing, but there are plenty of online calculators available to help you estimate what you'll pay under all of the most likely scenarios (under Boehner's plan, under the Democrats' plan, if we simply go flying off the cliff). A single person earning $50,000, for example, would pay $10,313 in federal taxes (21 percent) if we went over the cliff, $9,753 under the GOP plan (20 percent tax rate), or $8,753 under Obama's plan (18 percent effective rate). Policy wonks say it's a good idea to take the calculators for a spin. "Some but not all of these tax hikes are still likely to go into effect as part of any deal to fix the nation's giant budget deficit," says Ian Salisbury at SmartMoney. "But just which ones is anybody's guess."

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Why more NFL teams should start rookie QBs

Andrew Luck, Robert Griffin III, and Russell Wilson are on the verge of making playoff history
If the NFL playoffs started today, a record three rookie quarterbacks would be leading their teams into the postseason. With two weeks left to play, Indianapolis' Andrew Luck, Washington's Robert Griffin III, and Seattle's Russell Wilson all have their teams roaring toward unexpected postseason berths.
This is no fluke. It's a reflection of the new approach teams have begun to take with their freshman play-callers.
Teams used to insist that rookie quarterbacks weren't ready to lead a team to victory. When the Cincinnati Bengals selected Carson Palmer with the first overall pick in the 2003 draft, they hailed him as their new franchise player. Yet the following season, Palmer never once left the sidelines. The Bengals benched their prized rookie for the entire year, thinking he would develop faster by first watching a veteran quarterback. This was hardly unusual. Teams had long believed that rookies should be nurtured and eased into the pros. If you threw them right into the deep end, went the conventional wisdom, they would surely sink.
Michael Vick, the first overall pick in 2001, started just two games his rookie year. Eli Manning, Ben Roethlisberger, Phillip Rivers, and Aaron Rodgers — all highly-touted first round picks — began their careers as spectators, too.
In recent years, however, teams have been more adventurous with their new talent. In turn, more and more rookies have proven the old watch-and-learn system wrong.
Baltimore Ravens head coach John Harbaugh surprised everyone by naming rookie Joe Flacco his starting quarterback prior to the 2008 season. Flacco promptly led the Ravens to the AFC championship game, falling one win shy of the Super Bowl. That same year, fellow freshman QB Matt Ryan started every game for the Atlanta Falcons and took his team to the playoffs.
Mark Sanchez followed suit in 2009 with the New York Jets, driving his team to the AFC title game. And last year, Cincinnati's Andy Dalton and Houston's T.J Yates became the first rookie quarterbacks to face each other in a playoff game.
Since the AFL and NFL merged in 1970, just 11 freshman quarterbacks have started a playoff game; six have done so since 2004.
Even QBs whose teams failed to make the postseason have turned in sparkling rookie seasons in recent years. In 2010, Sam Bradford brought the St. Louis Rams, fresh off a one-win season, to the brink of the playoffs. And last year, number one pick Cam Newton obliterated a slew of rookie passing records.
In no season has this new phenomenon been more prominent than the current one. Five rookie quarterbacks started on opening day this year. Never before had more than two rookie quarterbacks done so.

This year's rookies aren't flailing away either. Leading the pack is Griffin, whose 104.2 passer rating — a composite measure of key passing statistics like completions, passing yards, and touchdowns — ranks second in the NFL behind only Rodgers, last year's league MVP. If Griffin keeps up the pace, he would destroy the record for the highest rookie passer rating ever. On top of that, his 6.7 rushing yards per attempt leads the league — not just among quarterbacks, but among all players.
By Total Quarterback Rating — a more nuanced version of passer rating created by ESPN — the big three rookie passers (Luck, Griffin, and Wilson) all rank in the top 11 league-wide. And even lesser-name rookies are enjoying relative success. Ryan Tannehill is turning in a respectable season for the struggling Miami Dolphins. And with Griffin out last week due to injury, rookie teammate Kirk Cousins picked up the win, throwing for 329 yards and two touchdowns.
Perhaps the driving factor behind this surge of rookie success is that college football has transformed in recent years to more closely resemble the pro game. College coaches have placed an increased emphasis on passing, and have adopted more and more NFL-style formations and plays — in some cases, college teams have even developed new tactics later appropriated their pro counterparts. As a result, college passers now enter the league with a built-in knowledge of the playing style, allowing them to more seamlessly transition between the two levels.

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Gun Violence -- Let's Shift the Odds in Favor of the Good Guys!

The unimaginable horror of Sandy Hook jumpstarts another "national conversation" about firearm violence. President Barack Obama, promising "meaningful action," said: "We will have to change. ... We can't tolerate this anymore. These tragedies must end."
Let's examine four of the "commonsense" measures frequently proposed by "gun control advocates":
One, closing the "gun show loophole." What gun show loophole? Restricted from selling at guns shows prior to 1986, a licensed dealer today requires a background check whether he sells guns at a store, a gun show or the back of his SUV.
Two, banning "high-capacity" magazines. One of the firearms used by Adam Lanza was a Bushmaster .223, with a magazine that can carry as many as 30 rounds. Would there have been less carnage had he been limited to a firearm with low-capacity magazines? What is the appropriate amount of firepower? Clips with 10 rounds? Five rounds? If the idea is to reduce the lethality of the guns, what does this do to reduce the lethality of the shooter's intent?
The deadliest school massacre on American soil appears to have occurred in Chicago in 1958. A student set fire to the school, killing 92 students and three nuns. And in 1927, in Michigan, a former member of the school board set bombs at three schools, killing 45 (mostly second- to sixth-graders), including the bomber.
The Columbine tragedy could have been worse. Eric Harris and Dylan Klebold set bombs throughout the school, but only one partially detonated, doing little damage. But had the bombs gone off as intended, hundreds could have been killed.
Three, reinstating the so-called "assault weapons" ban. An "assault rifle" is one where puling the trigger unleashes a volley of bullets, like a Tommy gun or AK-47. Since 1934, these firearms require licensing and registration. And in 1986, these weapons were banned from civilian sale. These laws remain in effect. The "assault weapons" ban did not restrict fully automatic weapons. Again, they were already under strict guidelines.
What exactly did this ban do? It outlawed certain weapons based on cosmetic features, many of which have nothing to do with the firepower or lethality. For example, the ban defined as an "assault weapon" a firearm with three or more of the following features: a folding or telescoping stock; a pistol grip; a bayonet mount; a flash suppressor; a muzzle capable of launching a grenade; and a magazine capacity over 10 rounds. It outlawed the manufacturing of 18 specific models of semi-automatic weapons.
The Bushmaster .223 was not one of the outlawed weapons.
The ban, enacted in 1994, expired 10 years later. What has been the result? Nothing. Crime was unaffected. The reason is simple. Assault-style rifles (the kind banned by the law) are rarely used in crime. Less than 1 percent of weapons used in crimes are fully automatic rifles (illegal to buy for nearly 30 years). An estimated 1 to 2 percent of firearms used in crime are assault-style rifles, like the one used in Newtown.
Four, requiring a mental health test to prevent the "mentally ill" from purchasing a firearm. The goal is to predict who will use a firearm in an unlawful way. But how to define mental illness? Is it depression? Abraham Lincoln supposedly suffered from depression or melancholia. Would the 16th president be denied the right to purchase a firearm? Do you forbid someone from purchasing a firearm if he or she is in therapy? Should a psychiatrist be required to inform the police when a client expresses anger, hatred or feelings of revenge?
Apart from the Second Amendment, how many other amendments to the Constitution will have been violated by denying someone the right to purchase a firearm because he is predicted to use the gun illegally — based on a psych test.
So what can be done?
We can harden the target to make it more likely that the shooter will encounter resistance. We can re-examine the soundness of "gun-free" zones like schools and malls. By law and policy, these are places where bad guys know there are no guns.
Rampage school shootings in Pearl, Miss., Edinboro, Pa., and in Grundy, Va., have been stopped or minimized by citizens with legal weapons. More recently, it appears that a concealed-carry weapon (CCW) holder minimized the damage that a shooter sought to inflict at the Clackamas Mall near Portland, Ore.
Nick Meli, who has a CCW permit and was armed, positioned himself near the mall shooter. Meli did not shoot, but feels he stopped what could have been greater carnage: "I'm not beating myself up 'cause I didn't shoot him. I know after he saw me, I think the last shot he fired was the one he used on himself."
Americans, according to criminologist Gary Kleck, use guns 2.5 million times each year for self-defense, usually just brandishing the weapon. (The attacker is wounded in less than 8 percent of self-defense cases.) Of the 2.5 million, 400,000 claim that but for their gun they would have been dead. If we're serious about "doing something," we might consider shifting the odds in favor of the good guys.

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Why are flags flown at half-staff in times of mourning?

Flying a flag at half-mast has become a well-recognized symbol of national grieving, but where did this tradition originate?

How did the tradition of flying the flag at half-staff get started?
It's tough to say, but the oldest commonly accepted reference to a half-staff flag dates back to 1612, when the captain of the British ship Heart's Ease died on a journey to Canada. When the ship returned to London, it was flying its flag at half-mast to honor the departed captain.
SEE ALSO: 5 gun-rights advocates who changed their minds after Sandy Hook
Why would these sailors lower their flag to honor their departed captain?
According to one line of scholarly thinking, by lowering the Union Jack, the sailors were making room for the invisible flag of Death. This explanation jibes with the British tradition of flying a "half-staff" flag exactly one flag's width lower than its normal position to underscore that Death's flag is flapping above it.
How long is the flag flown at half-staff in the United States?
It depends on whom the nation is mourning. Title 4, Chapter 1, Section 7 of the United States Code outlines strict guidelines for how long the flag is flown at half-staff following the deaths of various members of the government. The death of a current or former president lowers the flag for 30 days, while the current vice president, chief justice of the Supreme Court, and Speaker of the House receive 10 days of half-staff flying following their deaths. Flags fly at half-staff from the day of death until the date of interment for cabinet secretaries, associate justices of the Supreme Court, former vice presidents, and the governors of states. The death of a current member of Congress lowers the flag to half-staff on the day of death and following day.
SEE ALSO: Why are there so few female mass murderers?
Does the president have any leeway when he's making these orders?
Yes. The president can make an executive order lowering the flag to half-mast to honor the passing of other important figures or tragic events. For example, President George W. Bush ordered the flags flown at half-staff until the interment of Pope John Paul II. With national tragedies, the length of time seems to be a bit more arbitrary. Following the Sept. 11 attacks, Bush ordered the flag be flown at half-staff until September 16, 2001. The Indian Ocean earthquake and resulting tsunamis in 2004 prompted flags to be flown at half-staff from a Monday through the end of the following Friday.
What days is the flag always flown at half-staff?
The flag always flies on half-staff on Patriot Day (Sept. 11 of each year), Peace Officers Memorial Day (May 15), and Pearl Harbor Remembrance Day (Dec. 7). On Memorial Day, the flag flies at half-staff until noon, at which point it is raised to the top of the staff.
SEE ALSO: Remembering Daniel Inouye: A quietly heroic life in politics
What if I can't fly my flag at half-staff?
Some flags, like the ones commonly seen in school classrooms or on houses, are fixed in a certain position on their poles. How does one handle the sticky situation of a flag that physically can't be flown at half-staff? The United States Code doesn't cover this conundrum, but the American Legion advocates adding a black ribbon to the top of the flag's pole to indicate mourning.
Can anyone other than the president order flags to be flown at half-staff?
Sure. Governors of states, territories, and possessions have the authority under the federal flag code to order a half-staffing, as does the mayor of Washington, D.C. It's not uncommon for a local mayor to order a half-staffing following the death of some prominent citizen, and occasionally businesses will half-staff their flags to honor the passing of a member of the company. Technically, these sorts of half-staffings aren't covered by the federal flag code. There's no penalty for breaking the federal flag code, though, so it's generally no big deal if a local leader wants to honor a prominent citizen in this way.
SEE ALSO: Big Brother's bird's-eye view
How does one raise a flag to half-staff?
Surprisingly, not just by raising it halfway up the flagpole. To properly fly a flag at half-staff in mourning, one quickly raises the flag to the peak of the pole before slowly lowering it back down to the half-staff position.

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The Newtown school massacre and America's gun obsession: By the numbers

The tragedy set off a surge in support for new gun control laws... and a buying frenzy in gun stores
In the wake of the Sandy Hook Elementary School shootings, in which 20 children and six adults were killed, President Obama is vowing to make gun control a priority in his second term. He promised to set up a task force and send Congress proposals on new restrictions in January, setting in motion what could be a bitter debate with Republicans, who oppose new restrictions on sales of guns and ammunition. The prospect of new gun laws (in a country with 270 million privately owned firearms) delighted some, and sent others rushing to sporting goods stores to buy weapons in case future restrictions make them harder to get. Here, a look at how the tragedy at Sandy Hook Elementary in Newtown, Conn., has affected America's obsession with guns:
5
States in which Walmart stores have sold out of five types of semi-automatic rifles like the one police say Adam Lanza used in the Sandy Hook killings, according to a Bloomberg News search on the company's website. The states where the weapons are out of stock include Pennsylvania, Kansas, and Alabama.
SEE MORE: Ronald Reagan would demand more gun control
$30,000
Sales at Pullman Arms in Worcester, Mass., on the Monday after the Newtown killings, up from $2,000 on a typical Monday. Most of the guns people bought were assault rifles, or ARs, like the Bushmaster rifle police say Lanza, who killed himself at the school as police arrived, used. "People want ARs because people are afraid there will be a ban on assault weapons," says Pullman Arms co-owner Alicia Merritt.
4,154
Record number of background checks submitted for gun purchases in Colorado on Saturday, the day after the Newtown massacre. The previous one-day record in the state, 4,028, was set on Black Friday of this year.
SEE MORE: Why states should take the lead in reforming gun laws
2,383
Background check requests made in Nevada from Friday through Sunday, another record, according to the Nevada Department of Public Safety. The previous weekend record in the state (2,315) was set over Black Friday weekend, which is typically the annual peak.
114,000
Background checks requested in Nevada this year, as of Dec. 16
SEE MORE: Is the Second Amendment obsolete?
104,288
Background checks requested in Nevada as of the same date last year
154,873
Applications for would-be gun buyers submitted to the National Instant Criminal Background Check System (NICS) on Black Friday this year, the most in a single day since the system's inception in 1998 and a 20 percent increase over the number submitted on Black Friday 2011
SEE MORE: What 'meaningful contributions' will the NRA offer after Sandy Hook?
2
Number of times the NICS shut down on Black Friday this year due to system overload. One shutdown lasted 18 minutes, the other 14 minutes.
16.4 million
Background checks run nationwide in 2011, according to the FBI
SEE MORE: The Connecticut school massacre: Read the NRA's first public comments
194,814
Signatures on a petition at Whitehouse.gov (as of early morning on Dec. 20) demanding the introduction of new gun-control legislation
8,000
New members the National Rifle Association, the nation's leading gun-rights advocacy group, says it has signed up daily since the Connecticut shootings
SEE MORE: The media should be ashamed of its Connecticut coverage
200
Percentage increase in prices on the eBay auction website for ammunition for Glock handguns (another type of weapon Lanza reportedly carried). The running bid for four Glock magazines rose to $118.37, compared to $45 on the day before the shooting. The bid in an auction for seven Glock magazines hit $201 on Dec. 17, up from $71.01 before the massacre.
200
Percentage increase in reported sales of armored backpacks for children since the Newtown shooting rampage. The backpacks, with bulletproof-plate inserts, cost up to $400. Kerry Clark, president of Texas-based Backpackshield.com, sold 15 of the backpacks on Wednesday. He first started making them following the Virginia Tech mass shooting in 2007, and in a typical month, he sometimes sells just one. "It's the busiest I've seen it in my life," he said.

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Fixed mortgage rates end year above record lows

WASHINGTON (AP) — Fixed mortgage rates  rose slightly this week off their record lows. The year ends much like it began, with few people able to take advantage of the best rates in history.

Freddie Mac said Thursday that the average on the 30-year home loan increased to 3.95 percent from 3.91 percent. Last week's rate was the lowest average on records dating to the 1950s.

The average on the 15-year fixed mortgage rose to 3.24 percent. That's up from 3.21 percent, also a record low.

Rates have been below 5 percent for all but two weeks in 2011. Even so, this year is shaping up to be one of the worst ever for home sales.

Previously occupied homes are selling just slightly ahead of last year's dismal pace. And new-home sales appear headed for their worst year on records going back half a century.

Next year could be better. More than 5 percent of households said this month they plan to purchase a home within the next six months, according to the Conference Board.

Builders are also hopeful that the low rates could boost sales next year. Low mortgage rates were cited as a key reason the National Association of Home Builders survey of builder sentiment rose in December to its highest level in more than a year.

But so far, rates are having no major impact. Mortgage applications have fallen slightly in recent weeks, according to the Mortgage Bankers Association.

High unemployment and scant wage gains have made it harder for many people to qualify for loans. Many Americans don't want to sink money into a home that they fear could lose value over the next few years.

To calculate the average rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week. The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for the 30-year loan was unchanged at 0.7; the average on the 15-year fixed mortgage was unchanged at 0.8.

For the five-year adjustable loan, the average rate rose to 2.88 percent from 2.85 percent. The average on the one-year adjustable loan ticked up to 2.78 percent from 2.77 percent.

The average fees on the five- and one-year adjustable-rate loans were unchanged at 0.6.

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Fixed mortgage rates rise above record lows

WASHINGTON (AP) — Fixed mortgage rates rose slightly this week off their record lows. The year ends much like it began, with few people able to take advantage of the best rates in history.

Freddie Mac says the average on the 30-year home loan increased to 3.95 percent from 3.91 percent. Last week's rate was the lowest average on records dating to the 1950s.

The average on the 15-year fixed mortgage rose to 3.24 percent. That's up from 3.21 percent, also a record low.

Rates have been below 5 percent for all but two weeks in 2011. Even so, this year is shaping up to be one of the worst ever for home sales.

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New Website Takes Social Approach To Personal Finance

The Internet is a great source of information on personal finance, but often this information lacks the personal touch. The new website MyMoneyCircles.com aims to provide that personalized element by taking an interactive, social media-style approach.

Though it focuses on the human element, MyMoneyCircles is anything but soft and fuzzy. The website refers to its approach as a "boot camp" for personal finance. But what exactly does a personal finance boot camp entail?
Getting financially fit

The boot camp method at MyMoneyCircles involves pushing participants to get their personal finances in the best shape possible. And the boot camp analogy is apt, because it highlights the simple fact that financial responsibility often isn't easy, and building robust savings accounts is often an act of sacrifice.

MyMoneyCircles will conduct a series of boot camps to address a variety of financial goals, including:

    * Saving money
    * Managing credit and debt
    * Protecting family and assets
    * Planning for the future

The personalized support system at MyMoneyCircles is designed to help users make the changes necessary to meet these goals. By engaging participants throughout the process, and providing advice tailored to their needs, the site aims to lead them each step of the way toward financial improvement.

Here are some of the methods MyMoneyCircles will use to engage, encourage, and energize those who want to improve their personal finances:

    * Personal assessment. A 10-question quiz will kick off each boot camp, to provide users with a clearer picture of their needs on each topic.
    * Customized advice and education. Participants will receive emails related to their areas of interest and access to online materials. Online resources will allow users to submit questions to financial experts through MyMoneyCircles.
    * A defined action plan. MyMoneyCircles will present participants with specific steps designed to get them to stop procrastinating and to start meeting their goals.
    * Community support. MyMoneyCircles is designed for users to share their personal experiences with other members of the community, especially those with similar needs and goals. In this way, users can help each other make progress.
    * Continued growth opportunties. MyMoneyCircles aims to provide multiple levels of informative material, allowing users to build on what they've learned.

Access to expertise

Central to the program is the expertise of Lynnette Khalfani-Cox. Khalfani-Cox, also known as "The Money Coach," is a best-selling author and frequently-quoted expert in the national media. Khalfani-Cox's input drives both the design and content of MyMoneyCircles, and she will answer individual participant questions too. A variety of financial specialists--full disclosure, this author will be one of them--will also be available to provide advice.

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It's Not Too Late: Year-End Tax Moves

Once you’ve reached the last month of the tax year, your options are limited to minimize your income taxes. But there are a few things that could still be done, so don’t give up hope.

For example, you could double up your real estate taxes by prepaying next year’s tax during December. Doing this with, for example, a $3,000 per year real estate tax bill could result in a reduction of tax for the year of $750 if you’re in the 25% bracket. Keep in mind though, that you’ll have forked out this money long before it is actually due in most cases, and for the next year you won’t have this deduction available if you used it in this year.

The same could be done with your charitable contributions - there’s no reason that you can’t make additional contributions to your favorite charities at the end of this year instead of waiting until next year.

You could also send your final estimated state income tax payment due in January of next year during December and claim that payment on this year’s itemized deductions as well.

Prepaying your January mortgage payment will credit that mortgage interest to this year as well, further increasing your itemized deductions.

Other itemized deductions could be “stacked” in one year, such as medical expenses (subject to the 7.5% floor) and miscellaneous deductions (subject to the 2% floor).

It’s important to keep in mind that the moves that you make this year might reduce your tax now - but you might have an adverse impact on next year’s income tax by doing so. It will pay to run the calculations based on what you know about this year’s tax and next year’s tax to make sure that it is in your best interest to do this.

Here’s how it might play out: if you prepaid your next year’s real estate tax during this year, it might reduce your deductions below the Standard Deduction - which could be a good thing. In doing this, you would get to use the Standard Deduction to increase your tax deductions on next year’s return when you specifically reduced your deductions for that year by prepaying the deductible real estate tax in during this year. In this fashion you might be making the most of the standard deduction and your itemized deductions year after year - one year using the “stacked” deductions, the next using the standard deduction.

These prepayment options could have a negative affect if you are subject to the Alternative Minimum Tax (AMT). Prepaying your state tax, mortgage interest and some medical expenses might trigger or cause an increase in AMT. One tactic that you might consider is selling a taxable investment that has an inherent loss; this is especially useful if you’ve sold another investment at some point in the tax year that has resulted in a taxable gain. Losses can be used to offset those capital gains dollar for dollar, and an additional $3,000 in capital losses can be used to reduce your ordinary income as well.

You can also make up for underpayment of estimated tax by taking a withdrawal from an IRA (especially if you’re over age 59½) and having tax withheld from the withdrawal. This can also be accomplished by having more tax withheld from your paycheck if you’re still working, by filing a new W4. Another significant move you can make includes the Qualified Charitable Distribution from your IRA, 401(k) or 403(b) - allowing you to bypass recognizing that income, including your RMD. This can only be done if you’re at least age 70½ and subject to Required Minimum Distributions. The charity receives a contribution, and you get to lower your year-end balance in your account, therefore reducing your RMD for next year.  For more details on this, you should check out the IRA Owner's Manual.

You can also delay your first RMD (if you reached age 70½ this year) until as late as April 1 of next year, although that will mean you have to take two RMDs next year. But in some circumstances that may be the better option.

You can also make a deductible contribution to your IRA, if you qualify - but you don’t have to do that before the end of the year, you have until April 15 to do that.

This isn’t an exhaustive list of year-end tax moves, just several of the more prominent ones. Hopefully you’ll find what you need here to help with your year-end tax plans.

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End-of-the-Year Checklist for Divorcing Women

Most women wait until after the holidays to move forward with their divorces --and that’s completely understandable. Many don’t want to disrupt family traditions for their children. Some welcome the distraction offered by the hustle and bustle of the season. And, of course, others want to avoid the discussions that inevitably seem to arise whenever and wherever relatives gather.

Interestingly, though, January is the month when most divorces are filed. Obviously, turning the page towards a New Year inspires a fresh start –and that’s completely understandable, too. If you’re headed in that direction, it makes sense to spend a little time this month planning ahead. You can do so discreetly, and then know that you’ll truly be ready to start the New Year on the right foot.

To help get you begin, here are a few things you can do now to help make the divorce process smoother in 2012:

1. Start collecting financial documents. Watch the mail for year-end statements from banks, credit card companies, etc.  As we outline in our Divorce Financial Checklist, preparing for divorce requires gathering all the relevant documents related to your bank and brokerage accounts, credit cards, mortgages, etc. Once you have collected them, make copies, and take them to a trusted friend/family member, or use a safe deposit box that your husband can’t access.

2. Check your credit report. While you’re gathering your financial records, keep a careful eye on your credit card statements, and if you haven’t already done so, request a copy of your credit report. Once you have the report, monitor your score carefully so you’ll be the first to know if any unusual activity occurs.  (For example, is your husband using your joint credit cards to buy his girlfriend gifts this holiday season?)  See my post, How To Protect Your Credit Score During Your Divorce, for more tips

3. Research divorce professionals in your area. If you want to ensure the best possible outcome for your divorce, take the time to build a qualified divorce team. I recommend you start with these three players: a matrimonial/family law attorney, a divorce financial planner and a therapist/counselor. Spend some time this month researching divorce professionals and create a short list of candidates for each position. Schedule interviews with each top contender in January, and rest easy knowing that by February 2012, you’ll be benefiting from the expert guidance of a top-notch divorce team.

4. Open new accounts in your name. Moving forward as a single woman in 2012 will require that you have a bank account and credit cards in your name. Lay the groundwork now.  Don’t use the bank where you currently have your joint accounts. Go to a different bank and open both a savings and a checking account in your name. You’ll need your own credit card, too, so you should start that process now, as well. New federal regulations are making it harder than ever for women with little or no income to establish credit on their own. You can do it. But, plan accordingly and know that securing credit is going to be more complicated than just filling out an application or making a single phone call.

5. Remain vigilant. Is your husband using the good cheer of the holidays as cover while he dissipates family assets? Be attentive, and if you are concerned at all about financial shenanigans by your husband, you may want to think twice about filing a joint return with him for 2011.

Some women who are considering divorce let the holidays get them down. Don’t be one of them. Use this opportunity to start planning ahead, and you’ll be able to start the New Year confident that you are on the way to a more stable and secure financial future.

--------------------------------------------------------------------------------------- Jeffrey A. Landers, CDFA™ is a Divorce Financial Strategist™ and the founder of Bedrock Divorce Advisors, LLC (http://www.BedrockDivorce.com), a divorce financial strategy firm that exclusively works with women, who are going through, or might be going through, a financially complicated divorce. He also advises women business owners on what steps they can take now to “divorce-proof” their business in the event of a future divorce. He can be reached at Landers@BedrockDivorce.com.

All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

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