As December rapidly approaches, it's time...

to think about income taxes, things financial and what you may or may not want to do before year end.  With income tax law, particularly those involving deductions in a state of flux, there is a lot to consider.  As always, you should consult with your own tax and investment advisors before doing anything.  However, you may want to consider the following:

If you are a person who itemizes your deductions and you have a mortgage, you may want to make an extra mortgage payment before year end.  You can't prepay more than one month and deduct the interest, but with the mortgage interest deduction possibly being limited or even eliminated (I doubt it will happen, but it is possible), best to take advantage while you can.

The same is true if you have enough medical expenses to take an itemized deduction.  There is currently a limit on these deductions, you can only deduct those expenses that exceed 7.5% of your Adjusted Gross Income (AGI).  That limitation will grow to 10% next year.  So if you can order a three month supply of a prescription medication, buy new glasses or have any other programmed medical expenses you can push from 2013 to 2012 it may be to your advantage.  On a related note, if you have a Flexible Spending Account through your employer, be sure to use all of the money in it before the plan year ends.

If you have a dependent in college, write the check for next semester before year-end.  The American Opportunity Credit will expire in 2013, but you're allowed to use the credit on your 2012 tax return for spring semester 2013 tuition expenses.

If you are married and one of you is self-employed and the other works for an employer, or if you as an individual are both working as an employee and run your own business, you may want to consider whether or not you've paid enough in estimated taxes for 2012.  If it looks like you will end up being underwithheld for any of the first three quarters of 2012, there's a trick you can use to avoid the underwithholding penalty.  While estimated payments are considered to be made in the quarter which the payment is actually sent to the IRS, withholding from an employee's pay is considered to have been withheld equally throughout the year.  Someone who will owe a penalty for not paying enough in estimated tax in any of the first three quarters can have enough withheld from their December pay to cover the obligation and avoid the penalty.  Assuming of course, your pay in December is high enough and you can survive without needing that tax payment.

As previously mentioned, George Lucas is saving hundreds of millions in income tax by selling his company this year rather than next.  If you have an investment where you've made a large gain, you may lower your tax burden by selling before year end.  But don't just liquidate an investment solely to save income tax, if you planned to keep it for the long term.  Again, the investment advisor is the person to discuss this with.

A lot of common sense stuff, like maxing out your 401(k) and the like you should already know, so I won't mention those things.