It's time for year-end tax planning!

07 November 2011 / Uncategorized / Comments Off on It's time for year-end tax planning!

 It's that time of year again. Thanksgiving, Christmas, Hanukkah, Kwanza and the upcoming New Year are all right around the corner. This season signals the end of another tax year! Over the next few weeks, there's plenty you can do to make next April 15 seem like another holiday. Here are some steps to take now to make tax filing season easier and more productive:

  • Review your records. Good tax planning can only be accomplished if you have kept good records throughout the year. Review your checkbook and credit card records now, and make lists of your tax-deductible expenses: charitable contributions, medical expenses and business expenses. Determine if you will benefit by making additional contributions or business expenses prior to year-end so that you can reduce your 2011 tax bill.
  • If you own rental property, total your rent income and expenses and determine where you stand this year. You may want to make needed repairs or improvements in 2010 to obtain the deductions this year.  Ensure that you have a good idea of what your depreciation deductions will amount to and investigate ways to accelerate your depreciation, if possible.
  • Sole proprietors and home-based business owners may have the opportunity to make investments in computers or other equipment, or to accelerate or delay billings for services. And, taxable income can be increased or decreased by paying or deferring ongoing business expenses.
  • Investors in stocks and bonds held outside of retirement plans should review their year-to-date gain or loss positions to determine if any gains or losses should be harvested before year-end. Remember that each year you can deduct up to $3,000 of excess capital losses against ordinary income. If you have a loss position in a stock or mutual fund, consider selling that security to recognize the loss in 2010. If your tax bracket is 28%, a $3,000 net loss will cut your tax by $840.
  • Consider making an IRA contribution. Depending on your level of income and age, you may be entitled to a $5,000 tax deduction ($6,000 for those age 50 or older) for your contribution to a traditional IRA.
  •  If your goal is to increase your taxable income, you can elect to convert your traditional IRA to a Roth IRA. This will create taxable income this year but future withdrawals from your IRA, including the buildup of earnings, will be tax-free.
  • If you are eligible to participate in a 401(k) or 403(b) plan at work, you may want to max out your contribution to the plan before year-end. This is another excellent way to shelter current income from taxation.Don't forget to review your cafeteria plan at work if you have set aside funds in 2011 for medical expenses or dependent care. Remember, if you don't use the amounts you set aside by year-end, you will lose them.



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