- As long as it makes financial sense, sell any of your stocks that are in a loss position to offset any capital gains you may have from the sales of other assets. But if you have losses from 2010 or from prior years, consider selling stocks that have built-in gains in order to use the loss and shelter the gain.
- Install energy saving improvements in your personal home in order to reduce your taxes by up to $500 (Some improvements are limited to 10 percent of qualified expenses and amounts taken in prior years).
- Secure deductions for charitable gifts by keeping excellent records. If you donate clothing or household items to charity, be sure to take digital pictures so you can prove the property's condition and worth. If you charge a donation to a credit card in 2011, you can deduct it even if the bill isn’t paid until 2012.
- Pay your property taxes by year-end in order to deduct them in 2011. In El Paso, property taxes are not due until 01/31/12. Paying them early will allow you to double up your deduction for 2011 (assuming that you paid 2010 taxes in January 2011).
- If you are going to buy a car in early 2012, consider buying the car before the end of the year so that you deduct the sales tax paid on the auto in addition to the sales tax amount calculated from the IRS tables.
- Bunch out-of-pocket medical expenses into one year. Medical deductions are only allowed to the amount that exceeds 7.5 percent of your adjusted gross income.
- Reduce, or in some cases, eliminate the estimated tax penalties by paying at least 100 percent of your 2010 tax (110 percent if your AGI exceeded $150,000 in 2010). Alternatively, try to estimate your 2011 tax liability and make payments equal to (or greater than) 90 percent of your estimated 2011 tax.
- Divide tax on real estate gains. If you sell property before the end of the year, consider receiving the proceeds in two payments – one in 2011 and one in 2012. This very easily could result in you dropping into a lower tax bracket.
- Review your alternative minimum tax (AMT) liability. You may be able to reduce or eliminate the damage by postponing tax preferences to 2012. However, if you definitely will pay the AMT in 2011, you might accelerate taxable income into this year if the extra income will be taxed at a lower rate than your normal rate.
- Lock in higher education tax breaks. The tax law provides some relief to parents who put their kids through college and grad school. But the tax benefits phase out for certain high income taxpayers. Strategy: Pay the tuition bill before Jan. 1st as long as the related education will begin in the first three months of next year.
- Consolidate personal loans with a home equity loan and deduct the interest. Normally, you cannot deduct interest payments made on personal loans. (There is a limited exception for student loans.) Convert non-deductible personal debt into deductible home equity debt. This way, you can deduct the interest on up to $100,000 of the home equity debt, regardless of how you use the borrowed funds. With interest rates at an all-time low, this is the best time you will ever find to refinance your home.
11.5 Check out my Facebook page for daily tax savings tips that we have been posting since 10/21/11 (http://www.facebook.com/#!/pages/Wayne-J-Belisle-CPA/185259446999).
Like any good CPA, I need to add a disclaimer: Unfortunately, it is impossible to offer comprehensive tax info over the Internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.