Year-End Tax Tips

With 2010 coming to a close, there a number of year-end tax tips that taxpayers can utilize for their tax planning benefit. Generally, these fall under one of two areas: accelerating or deferring income and accelerating or deferring deductions.

 

For example, if you anticipate a higher tax rate next year (2011), you may want to accelerate income into the current year (2010) and defer deductions into next year (2011) when your tax rate is higher and you could make better use those deductions. If you anticipate a lower tax rate next year (2011), the reverse would hold true.

 

Below are several tips that you can use to accelerate/defer income and accelerate/defer deductions:

 

Accelerating Income

·         Ask your employer to pay out any bonuses in 2010 instead of 2011

·         Sell stocks and other investments that have gains in 2010

·         Take IRA/Retirement plan distributions in 2010

·         Convert a pre-tax retirements savings plan (i.e. 401k) to a Roth account, and opt to report the income in 2010

 

Deferring Income

·         Ask your employer to pay out any bonuses in January 2011 instead of 2010

·         Wait to sell stocks and other investments that have gains until 2011

·         Wait to take IRA/Retirement plan distributions until 2011

·         Convert a pre-tax retirements savings plan (i.e. 401k) to a Roth account, and opt to report the income in 2011 and 2012

 

Accelerating Deductions

·         Pay expenses that are deductible (itemized deductions) in 2010. For example, medical expenses, charitable donations, property tax, mortgage interest, make an extra mortgage payment, etc.

·         Sell stocks and other investments that have losses in 2010

·         If you’re self-employed, boost business expenses; buy all the business equipment and supplies you need before year-end

·         Take advantage of available and/or expiring tax credits/deductions (such as the American Opportunity Tax Credit, Hybrid Vehicle Credit, etc.)

 

 

Deferring Deductions

·         Defer paying expenses that are deductible (itemized deductions) until 2011. For example, medical expenses, charitable donations, property tax, mortgage interest, etc.

·         Wait to sell stocks and other investments that have losses until 2011

 

For more information about year-end tax tips, please contact your local income tax preparation office for assistance.

 

Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Posted To: Ramblin Randall By: Ramblin Randall On: Monday, December 06, 2010
blog comments powered by Disqus