Satisfied Holidays! As the holiday season has now snuck upon us and we are located in the final weeks of 2010, I thought it best to speak about a few Tax Saving Strategies that can still be implemented before the this year tax year ends. I know that everybody wants to enjoy the most recent weeks of 2010 and not think about taxes until The month of january rolls around, but even if you only take advantage of one or two of the methods listed below, you will be helping to lower your 2010 tax bill. My authentic goal was to hold off on sending these tips out right up until after the President and Congress finalized their extension in the Bush-era tax cuts as well as the other tax issues increasingly being debated, but since they have dragged their feet for a few days now, I thought it best to go ahead and issue these tips before their decision. As always, please contact someone at the firm should you have any questions about the information below and it applies to your individual tax situation. Year-End Tax Planning for Individual Taxpayers
Prepay your mortgage payment that is due with January 1, 2011 by December 31, 2010. It is possible to deduct the interest on your 2010 tax return.
Charge allowable expenses like medical bills, state and local taxes, property taxes and charitable donations to your credit card. By asking these expenses now, they become deductible in 2010 even if you do certainly not pay the credit card bill until after the year stops.
Pay your state estimated tax payment that is due for January 15, 2011 no later than December 31, 2010. This will count towards your itemized deductions on your 2010 and beyond tax return.
Sell stock losses before the year edges. This will help to offset any capital gains and possibly let you take a loss of up to $3, 000 on your 2010 income tax return.
Maximize your charitable contributions and donate unwanted things before the year is over. Please try to document the items that have been donated and take pictures as well if possible. Also, preserve the receipts that you receive when donating.
Exhaust all of the cash contributed to your Flexible Spending Account (FSA) by year-end. You may be able to charge expenses for 2010 through March 12-15, 2011, but please verify this with your employer since this is at their discretion. Any remaining funds after the wasting deadline are forfeited.
Consider rolling over your Standard IRA, SEP IRA, SIMPLE IRA or old 401(k) or perhaps 403(b) into a ROTH IRA before 2010 ends. Regarding rollovers and conversions to a Roth IRA in 2010 simply, you have the option of reporting the taxable portion of your rollover in your gross income for 2010, or reporting half in 2011 in addition to half in 2012.
Making energy-efficient purchases before twelve months end will allow you to be able to take advantage of several tax credits available:
Receive a tax credit of up to 30% of cost using a maximum of $1, 500 total for all home improvements manufactured in the following areas: Windows & Doors, Heating, Ventilating, Air-con (HVAC), Insulation, Roofs (Metal & Asphalt), Water Heaters ( non-solar ) and Biomass Stoves. This tax credit rating is currently only available for 2009 and 2010 tax years and only applies to an existing home that is your principal house (new construction and rentals do not qualify). Receive a levy credit of up to 30% of cost, with no maximum for those home improvements made in the following areas: Solar Panels, Solar Water Heaters, Geothermal Heat Pumps, and Small Wind Energy Devices. This credit is available through 2016 and can be used for the two existing homes and new construction (may either be considered a principal residence or a second home, rentals do not qualify). Year-End Tax Planning for Business Owners
For cash-basis taxpayers, pay out any outstanding bills by December 31, 2010. This permits you to deduct the expense in the current tax year even though the obligations may not hit your account until January.
Also to get cash-basis taxpayers, remember that only deposits made to the bank plus recorded on your books on or before December thirty-one, 2010 are taxable in the current year.
For accrual-basis taxpayers, write off any non-collectible accounts receivable.
Also pertaining to accrual-basis taxpayers, remember that your revenues are calculated according to what you invoice between January 1, 2010 and January 31, 2010. Any invoices created after December 31st, 2010 will be included in income for the 2011 tax time, regardless of when the service was provided or the product has been delivered.
If you are planning on upgrading your computer or any other business office equipment, try to do so before year-end. This will allow you to take good thing about any holiday promotions that are in effect and you can write off of the entire purchase amount for the 2010 tax year.
Compose off any obsolete inventory as of year-end.
Purchase products before year end. You can write-off up to $500, 000 in equipment purchases in 2010. If you are facing a profitable year and therefore, higher taxes, this could offer an instant last-minute reduction in price for your business.