What a a year 2010 was! With all the media exposure on tax relief scandals like Roni Deutch and American Tax Relief, celebrity tax woes, and the UBS offshore tax evasion cases. Alas, we are at a close of the year with only two weeks left before the new year rolls around, what can you do as an individual taxpayer now so that you can save some money come 2011 on your tax bill?
As they say: early bird gets the worm, so read on for some year-end tax tips!
(1) Deduct for Medical Expenses (CBS Moneywatch) Did you know that you can deduct your out-of-pocket medical expenses as long as they add up to 7.5% or more of your adjusted gross income? (For example: if you earn $75,000, that’s $5,625 you can deduct.) If you’re thinking of getting any elective surgery – even LASIK – that expense, plus other out-of-pocket medical care you paid this year for, could help reduce your taxable income.
(2) Go Green! When considering home improvements, do not forget a variety of federal tax incentives that can help you save money. One of the more popular tax breaks is the residential energy property credit. The credit is 30 percent of the sum of expenditures for qualified energy efficiency improvements, including windows, furnaces, water heaters, heat pumps, and more, which are placed in service in 2009 and 2010. The credit is limited to $1,500 for 2009 and 2010. The improvement must meet strict energy efficiency standards. If it does not, you cannot claim a credit. This is a common error and it can be a costly one. Our office can review your planned purchase and make sure you will qualify for this valuable incentive.
The Tax Code also rewards taxpayers who purchase “green” vehicles, such as hybrid vehicles and soon to be available plug-in electric drive vehicles. As with home improvements, the vehicle must meet certain energy efficiency standards. The IRS has certified the eligibility of many hybrid vehicles for the alternative vehicle tax credit. Additionally, the alternative motor vehicle credit is now treated as a nonrefundable personal tax credit. This means that it can be used to offset regular tax liability and AMT liability the same as other nonrefundable personal credits to the extent allowed. Do not forget, also, that as a bonus for purchasing any new vehicle by the end of 2009, you may deduct the sales tax that you pay on up to $49,500 of the purchase price, depending on the amount of your adjusted gross income.
(3) Boost Your Retirement Savings (CBS Moneywatch) If you’ve neglected to save this year, it’s not too late to get aggressive and further reduce your taxable income. The maximum contribution this year to a 401(k) is $16,500 (or $22,000 if you’re over 50). For IRAs, the max contribution is $5,000, or $6,000 if you’re above the age of 50. Expecting a year-end bonus? Not a bad way to pay yourself.
(4) Donate! If you make charitable donations this holiday season, not only will you be helping others who are in need, you can also claim your donations as deductions in your 2011 tax bill. Killing two birds with one stone has never felt so good!
(5) Get Your Files/Documents Ready to Go. One of the biggest mistakes taxpayers make is they wait until the last minute to get ready for their taxes. It is also one of the main contributors to unpaid back taxes–when people are overwhelmed stress, they get paralyzed and miss the tax deadline. Don’t procrastinate–get all your documents in order now even if you’re not going to work on your numbers yet. This way, when the holiday season passes and you’ve recovered from your food coma, you are already good to go!
Hope these year-end tax tips are helpful to get you thinking about 2011’s tax day.
More Tax Help, IRS News and Tax Relief Tips:
- IRS Help and Income Tax Relief for Individuals and Businesses Unable to Meet Tax Obligations
- IRS Tax Relief News–Did You File Your Taxes?
- Settling IRS Tax Debt: What Taxpayers Don’t Know About Tax Resolution Could Hurt Them
- Do You Owe Back Taxes? Are Under Audit? Don’t Hide from the IRS Anymore, Get Tax Relief Now!
- Tax Relief Expert Breaks Down Changes to IRS Lien Process For Struggling Consumers on Big Biz Show