Year-End Tax Planning

Taxation *with* representation ain't so hot either. ~Gerald Barzan

Here's some basic tax strategies to consider implementing before the end of the year to keep your income taxes as low as possible.

Review the New Tax Credits and Deductions
There's some new tax credits and deductions available for 2009. First, if you purchased a new car or truck you can write off sales tax even if you didn't itemize as part of the new vehicle sales tax deduction. If you are a homebuyer, you should review if you are eligible for the $8,000 tax credit for first-time home buyers. Homeowners should also review whether it would be advantageous to take the additional standard deduction for property tax in lieu of itemizing.

Individuals who have two jobs and Social Security recipients who are working should review their eligibility for the Making Work Pay tax credit.

Boost Tax Deductible Expenses
Every year you should look at strategies for increasing your deductible expenses versus those that are not. Make an extra mortgage payment. The extra interest you pay will be added to this year's mortgage interest by your lender, boosting your itemized deductions. (But confirm with your lender that your payment will be credited as paid in the current year!)

Pay your property taxes.
If your property tax bill is due early next year, you might want to pay it now and take the deduction.

Donate to charity.

Pay Deductible Medical Expenses.
Pay doctor bills, insurance premiums, buy eyeglasses, or stock up on prescription medications. You can take a deduction for medical expenses exceeding 7.5% of your adjusted gross income.

Boost business expenses.

Business owners and independent contractors can buy office supplies, invest in new equipment, or pay bonuses to their employees. They should also review their retirement plans or decide about setting up a retirement plan. Many retirement plans need to be established by the end of the year if owners want to make tax-deductible contributions for the year. You will want to review what constitutes a legitimate business expense just to make sure it will be tax-deductible.


Manage Your Investments to Take Deductible Losses
Sell losing investments to offset capital gains. Investors can lower their capital gains taxes by selling securities that have lost money. Losses offset gains dollar for dollar, and losses in excess of your gains can be deducted, up to $3,000 per year.

Max out your retirement savings. Contributions to a retirement plan reduce your taxable income.

Tax Strategies Beyond Form 1040
Check your:

* Tax-free gifts for education through Section 529 plans
* Maximizing Your Flexible Spending Accounts
* Lowering Estate Taxes Through Gifts

Questions? See your tax attorney and/or your financial advisor!