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1. Charity.  If you itemize your deductions, any gifts to charity you make before the end of the year are deductible. Not only will you be getting the advantage of an extra deduction, but you will also have the satisfaction associated with helping your favorite charities especially in these tough times when some charities are hurting for contributions. If you pay by credit card you can be assured of getting the deduction and you may be able to defer actual payment until 2012.

2.  Medical. If your medical expenses are high this year (remember: only your expenses above 7�% of your adjusted gross income are deductible), consider making payments in 2011 that are not due until the beginning of 2012. For example if you have monthly unreimbursed orthodontic payments due for your children, pay the January payment at the end of December. Consider buying any prescriptions for January before the end of the year. If you pay for your medical or dental insurance you can accelerate the payments.

3.   Mortgage interest and property taxes.  If you can pay some or all of your 2012 property taxes and January mortgage payment before the end of the year, these are also deductible.

4.  Employee business expenses.  If you deduct expenses related to your employment (e.g., tools if you are a mechanic), now is a good time to purchase those items. Remember employee business expenses are only deductible if they total more than 2% of your adjusted gross income.

5.  Self-employed income and expenses.  If you are self-employed, any necessary purchases you can make before January 2012 will be deductible. If possible, any income that can be postponed until January will not have to be reported as income on your return.

6.  Stock and bonds. If you have capital gains you should consider selling off some losing stocks. Your losses can offset any gains you have, and an additional $3000 is deductible per year. Because of the large losses on the stock market in the end of 2008 some may still have capital loss carryovers. If this is your situation you may want to consider selling stocks you have gains in. Any gains up to the extent of your prior year losses will not be taxable. But you have to consider if the investment is really one you want to get rid of, as you cannot sell and then re purchase it until 30 days have passed. If you sell a stock and repurchase before the 30-day period, the loss is not deductible under the "wash sale" rules. One way to work around this limitation is to sell the shares in one mutual fund and then purchase shares in a different fund with a similar stated goal. The losses should be deductible as long as the holdings are not identical.  CAUTION, Do not use this strIategy if you are in the 15% or less tax bracket. For 2011, capital gains rates are zero percent for those in the 15% or less tax bracket. Discuss limitations with your tax advisor.

7.  Gifts.  If you have children or grandchildren to whom you would like to give gifts, you may give up to $13,000 per recipient per year. If you are married both you and your spouse are allowed $13,000, so you can give $26,000 without any gift taxes being incurred. For larger gifts the rate is lower than in the past,  35% .

8. Pension plans and IRA's.  For 2011, the maximum you can contribute to an IRA is $5,000, and the maximum for a 401(k) is $16,500. At age 50 the limits go up to $6,000 for an IRA and $22,000 for a 401(k). You have until April 15 to make IRA contributions, but 401(k) contributions must be made before year-end. There are also income limits that can affect your deductions. As mentioned earlier this may also be a good time to consider converting a traditional IRA to a Roth IRA.

9. College expenses.  Depending upon your taxable income, you may be able to deduct your student loan interest. Tuition is also deductible if you haven't already used up the maximum allowed on tuition paid through the year. Consider paying all or a portion of your 2012 spring semester tuition before the end of the year.

10. State Taxes.   If you expect to owe state taxes or have a state estimate due on January 15, 2012 they will be deductible on your 2011 return as long as you pay them before December 31.

11. Energy Credits.  There is a credit for qualifying purchases on energy efficient improvements for your personal residences. Included are windows, doors, heating and air conditioning systems. This credit which is worth up to $500 is scheduled to expire at the end of 2011.

12.  Machinery and equipment purchases for business. 100% of the cost of new equipment purchased for a business is deductible in the year of purchase. This is schedule to expire at the end of 2011 although for most small businesses the section 179 deduction is large enough to give the same benefit.

There are many important factors that may affect your decision to choose any of these tips. Such as your expected income for next year, your current financial situation, your long terms goals, etc. Please call us if you would like to discuss any of these strategies.
 

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