Mary F. Kiser, CPA

YEAR-END TAX PLANNING TIPS

One or more of the following suggestions may help you lower your income tax liability for 2011:

~         If you send in estimated state and/or local income tax payments, mail the January, 2012 payment by the end of December.

~         Make your January, 2012 mortgage payment on your residence or rental property by the middle of December so the bank can credit the interest deduction to you in 2011.

~         Charitable contributions planned for 2012 can be accelerated to 2011 by either mailing the checks  or charging to your credit card by the end of December.

~         Take any non-cash contributions, like used clothing, toys, etc. to Goodwill or another organization before the end of the year and get a receipt.

~         Pre-pay 2012 real estate taxes before the end of December, 2011 or just 50% of the total tax that’s due in January of 2012.

~         Pre-pay 2012 college tuition, unless you’ve already maxed out the tax credit limitations for 2011.

~         If you’re eligible, consider the option of contributing to an IRA by April 15^th, 2012 or contributing to your small business retirement account.

~         Some taxpayers can take the standard deduction one year and itemize the next.  If your deductions fall short of the 2011 standard deduction amount, consider postponing some until 2012  However, if your 2011 deductions are over the standard amount, consider pushing some 2012 expenses into 2011. (Standard deductions are as follows for 2011:  $11,600 for married filing joint; $5,800 for single; and $8,500 for head of household.  Plus, there’s an additional $1,100 deduction for those age 65 and older.)

~         You may have an opportunity to sell investments at a gain to offset any capital loss carryforwards.  The 15% tax rate on long-term capital gains is still in effect for assets held over a year.

~         You may qualify for the special 0% tax rate on long-term capital gains and dividends if you’re in the 10% to 15% tax bracket.  The gains are tax-free until they push you into the 25% tax bracket. ($69,000 for married filing joint; $34,500 for single and $46,250 for head of household.)

~        Consider selling losing investments to offset any capital gains incurred during 2011 or being carried forward.

~         Remember that if you owe alternative minimum tax, you must rethink your tax planning.  Taking certain deductions may make you owe more minimum tax or may not benefit you because they have to be added back to determine the AMT liability.