Monday, December 20, 2010
5 Last Minute Tax Tips
1. Save money by prepaying tax-deductible bills. For example, if you paid your January mortgage in December, you could deduct the January interest payment this year. The same with a property tax bill. If a property tax bill is due in January or February of next year, as a homeowner you may also pay it this month and deduct it from your taxes for 2011.
2. Max out college and retirement contributions. If you have a 401k for yourself or a 529 college savings plan for the kids, make the largest additional deposit you can according to the legal limits and your own financial comfort. Remember though, it would pay to stretch yourself in this area. First of all, the money is not leaving your life; its going into the future to multiply on your behalf. And second, the government is going to give you additional credit for preparing for your own future as well as your childs! Being paid to save can be worth the sacrifice.
3. Collect December payments in January. If you're self-employed and you already know you earned much more this year than last year, you may want to defer collecting any payment for December services until January. This way you will not pay taxes in 2011 on what you earned in December. If you are an employee and expecting a bonus, try and see if your employer will pay the bonus after December 31st.
4. Make charitable contributions ASAP. Interestingly enough, as much as a quarter of all charitable gifts are made during the holiday season. If you itemize deductions on your tax returns and give money, stocks or even items in good condition such as toys, clothing and furniture, before the end of the year, you should be able to deduct it from your 2011 taxes. Always make sure, however, that you obtain a receipt as verification of your donation and that the organization or entity you are donating to is an IRS-recognized 501c(3) organization. If not, you may lose the benefit of the contribution.
Recent Post: 5 Tips for Avoiding Charity Scams
5. Take advantage of the energy efficient credit. Up to $1500 could be knocked off your federal tax bill in the form of a 30% credit earned by installing a new energy efficient heating or cooling system. If you were thinking about doing either and can afford to do it now, you may as well go ahead and make it happen.
If you take the time to prepare and begin taking care of your taxes today, you can save yourself a lot of energy, money and effort later.
Until Next Time,
Seek Wisdom, Find Wealth & Get Prepared!