2009 is nearly over! Time to start planning now for year-end tax savings! Here are some last minute ideas.
Load up the 401k
If you are employee with a 401k plan and can increase your contributions, last minute, consider doing so if you can spare the $$. This is a very simple way to decrease your 2009 taxable income while saving for retirement. Maximum is $16,500 or $22,000 if you are 50 or older.
Time Your Expenses
If your income is higher than normal this year (or even if it ain't that high), consider the following to decrease your 2009 taxable income:
Property Taxes - Many of you paid the first half of your 2009-2010 property taxeslast week. The remainder is due in mid-April 2010. If you want to lower your taxes this year, consider making that additional payment by December 31st.
Mortgage Payments - Pay your January mortgage payment in December! More interest expense to include in your itemized deductions. This is a no brainer!
Charity - Give away your money or items this year that you were planning to give next year. Just do it! Charities are hurting this year due to the economy and I know they will appreciate your support! HERE IS A LIST OF LOCAL VENTURA COUNTY AREA CHARITIES.
State Income Taxes - Heck, you'll owe it by April 15th, anyway! Pay it BEFORE January 1st and take a Federal tax deduction for it this year.*
Time Your Stock/Mutual Fund Sales
Stocks have gone up big time this year! If you have gains on stocks that you sold, take a look in your portfolio for losers. Consider taking losses to offset against those gains. You can always buy back the stock after waiting 30 days (IRS "wash sale" rules).
On the flip side, if you sold stocks for a loss this year, consider selling other stocks with gains in your portfolio to offset the loss. This is especially the case if your losses are greater than $3,000 (the maximum net loss the IRS will allow you to claim in one year). The beauty of this is that you can immediately buy the same stock again if you'd like as the wash sale rules do not apply to stocks sold for a gain.
If you have unrealized losses in your portfolio and do not have gains to offset them, consider taking some losses up to the $3,000 maximum. Clear out some dead wood and generate a tax deduction in the process.
Contribute to an IRA**
If you are eligible, contribute to an IRA up to the maximum of $5000 ($6000 for those 50 and over). You have until April 15, 2010 to do this. Tax deductible IRA contributions can be limited based on your income, filing status, your taxable income and if you are covered by a retirement plan at work. Click http://tinyurl.com/IRArules for the IRS rules on these limits.
Well that covers some basics! Now go reduce your taxes!
* Of course, there can be complexities with this depending on your tax bracket and situation, such as the dreaded Alternative Minimum Tax. If in doubt, ask your tax advisor.
** If you DON'T need a tax deduction, ARE eligible to contribute to an IRA and have extra cash on hand to invest long-term, I STRONGLY recommend investing in a Roth IRA. Another no brainer! Never pay taxes on that money, or earnings thereon, again!