Getting the most benefit from tax deductions requires multi-year planning as well as consideration of the alternative minimum tax (AMT).

The multi-year part involves bunching your expenses. Thats a strategy where you decide to accelerate or delay payments between different years for itemized deductions such as state income taxes, routine health care, and charitable contributions. You calculate the tax savings for each year and choose the most advantageous time to pay the expense and claim the deduction.

The AMT adds another step to the calculation because it eliminates certain deductions. For instance, state and local income taxes are not deductible when figuring AMT liability.

What if you usually claim the standard deduction? Youll still want to take a look at your total itemized deductions in case youre close enough to the tipping point to consider accelerating some expenses into 2012. In addition, there are circumstances where itemizing makes sense even when the total is lower than your standard deduction. Your exposure to the AMT can come into play here, too, since the standard deduction is not allowed in the AMT calculation.

For 2012, the regular standard deduction when youre married filing jointly is $11,900 ($5,950 for singles). The last few months of the year is a good time to review your situation and consider opportunities for bunching deductions. Planning could help you salvage itemized deductions that would otherwise be lost. Contact our office for more information about this tax-cutting strategy.

Did you know that this year you can give gifts of up to $13,000 to as many individuals as you want without being liable for gift tax? Normally, any gift you make counts towards your lifetime exemption from gift and estate taxes. Thats so you dont just give away your estate shortly before death to avoid estate taxes.

But each year you can make an unlimited number of gifts free of tax, provided theyre below a certain amount. The limit for 2012 is $13,000 per gift. A husband and wife each have their own separate limit, so they can jointly give up to $26,000 to any one person.

You can put the gift exclusion to good use in several situations. For example, you could use a multi-year gift program to decrease the size of your estate and reduce estate taxes. A married couple giving to each of their three children could reduce their estate by a total of $78,000 every year, for example.

You could also use the gift exclusion in an income-shifting strategy. You could make gifts of income- generating assets to a child who is in a lower tax bracket. If done carefully to avoid the kiddie tax, the result can be a lower overall tax bill for the family unit.

Two types of gifts are exempt from the $13,000 limit. You can make unlimited gifts for tuition expenses or medical expenses on behalf of any person, provided you make the payments directly to the educational institution or health care provider.

Contact our office for advice on how the 2012 gift tax exclusion could work for you.