At this time of the year, I know that tax planning is first and foremost on peoples’ minds. O.K., maybe the second thing. The reality is that in the thick of your holiday shopping and family-get-together-planning, there’s still time to do some tax planning before the end of 2011. Is that cool or what?!
Selling investments at a loss-it’s the ultimate acceptance of defeat, and something for which denial is a strong factor. That investment you made in a stock or a mutual fund has tanked in value since you bought it. It hurts; I know, I’ve been there too. But the paper loss can save you money on taxes when you sell it. Capital losses in excess of capital gains can be deducted against other income on your tax return, up to $3,000 per year. For a person in a 25% marginal federal tax bracket, that means Uncle Sam will “subsidize” $750 of that loss, which could help take some sting out of it.
Retirement accounts-it’s still not too late to sock away money in a 401(K) or IRA, and get a tax deduction for 2011. Business owners can still set up certain retirement plans before 12/31/11 and fund the plan early in 2012.
Accelerate deductions-for taxpayers who are not expecting to fall into the Alternative Minimum Tax (AMT) in 2011, there’s still time to bunch deductions into 2011 for added tax savings. Making the 4th state estimated payment by 12/31/11 (instead of the due date of 1/16/12) can add to itemized deductions for 2011, as well as work related expenses (as a miscellaneous itemized deduction), or even elective medical costs. There are certain ‘adjusted gross income’ thresholds to consider for these, but if the numbers work, you can save a few bucks in tax.
Charitable contributions-cash contributions or even contributions of “appreciated securities” can give you a good bang for the tax deduction buck, and can still be done before year end. While we’re on this topic, I’d like to take a moment for a shameless plug, on behalf of my non-profit clients, and other organizations to which I have a connection (in alphabetical order, to downplay any favoritism!)
Darfur Peace & Development http://www.darfurpeace.org
Doorways For Women & Families http://www.doorwaysva.org
Habitat for Humanity of Northern Virginia http://www.habitatnova.org
Homeward Trails Animal Rescue http://www.homewardtrails.org
College savings-if you need to save money for a child’s college education, establishing a 529 plan in the state in which you live will result in a state income tax deduction for amounts contributed to the plan.
I hope you found this information helpful, and please pass it along to anybody you know who can benefit from the information. If you make charitable contributions to any of the organizations I mentioned above, please let them know I pointed you in their direction.