, December 3, 2010 10:13 am
It seems like just yesterday that I was writing about year-end tax tips. I actually had to check my recent posts to make sure I hadn’t already written about this. Didn’t, so here goes:
* Timing Expenses and Income. It’s often a good idea, especially when tax rates are stable, to accelerate your deductions to this year and delay income to next year. Some of us (if you make more than $250,000) may be in for a tax increase next year, so you might want to consider reversing this strategy. I’d check with your income tax person for some additional guidance. If you make less than 250K, it appears unlikely your income tax rate will creep up so moving up deductions and postponing income may still work for you
* Maximize Above-the-Line Deductions. This would include IRA contributions, moving expenses, alimony payments, and self-employed health insurance expenses. These are good deductions because they reduce your Adjusted Gross Income
* Contributions to Charity. If you have some appreciated property you’d like to give to a charity, you’ll be allowed to deduct the full value and you won’t have to pay any capital gains taxes. If, however, you’ve got some property that’s depreciated, you might consider selling it first and then giving the proceeds to the charity so you can take a capital loss in addition to a charitable deduction. Don’t forget to make sure you know the limits and substantiation rules before making any donations. And, since income tax rates may be higher for some of you, check with your tax person as to whether you should wait until next year
* Save Like You’re Retiring Next Year. Maybe you are retiring next year…lucky you. But if not, move heaven and earth to max out on your 401(k), IRA, SEP, etc. Every dollar you contribute will reduce your taxable income in the year you make them. You won’t have to think about income taxes until you take the money out, hopefully, when you absolutely, positively have to: the April after you turn 70 ½
I hope these ideas are useful. I’ll have some more soon. Until next time, here’s to good planning!