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As the end of 2010 approaches we know you are busy with holidays, family, and travel, but it is also a good time to do some last minute tax planning. As a courtesy, we want to provide you with a few eleventh-hour tax tips you may find useful. Although tax planning is rarely fun, these strategies could help you keep more of your hard earned money. Go Green: There is still a tax break available for the purchase or lease of certain hybrid vehicles. In addition, energy-efficient home improvements to your principal residence such as insulation qualify for credit of 30% of the cost, up to $1500 and can be claimed on your 2010 taxes. There is also a renewable-energy credit that lets you deduct expenses for items like geothermal heat pumps, solar panels, and wind-energy systems. (Note: Some of these devices need to be installed this year to earn the credit). Accelerated Payments: Accelerating your mortgage payments into the new year allows for an itemized deduction of the interest. You may also want to pay property taxes this year in order to claim the added standard amount on your 2010 return. Charitable Donations: If you have stock you would like to donate, you can deduct the full market value and skip paying capital-gains (the charity doesn't pay either). Remember to get a receipt and an acknowledgment from the charity for gifts of $250 or more. IRA Contributions and Distributions: You may want to consider IRA withdrawals to pay for education, including that of your grandchildren without owing the 10% penalty. Depending on your income, you may be able to deduct your IRA contribution as well. Alternative Minimum Tax (AMT): If your income is above $75,000 and you have significant write-offs for personal exemptions, state and local income and property taxes or interest on a home equity loan not used to improve a house, you may want to discuss whether you are subject to the AMT with your tax professional. Possible Deductions: This is an excellent time of year to get organized. Gathering cash receipts will help you calculate possible deductions and miscellaneous payments. Examples: Do you have a hobby or activity that might also qualify as for-profit income? If so, these losses might also be eligible for deduction. Prepaying college tuition for your children or grandchildren, could allow you to qualify for the American Opportunity Credit, Lifetime Learning credits, or other deductions. Paying ahead for next year's tuition costs could provide a nice write-off this year. A few extra notes for those of you who are still working: 401(k): If you are still working, maximize your 401(k) contributions, up to $16,500 or $22,000 if you will be age 50 or older in 2010. Making Work Pay Credit: In July of 2009, you may have noticed an increase in your earned income thanks to this credit. Earned income went up by 6.2%, though certain AGI amounts will affect the amount you can claim. You may have received the credit, but earned too much to be entitled to it. Unless you adjust withholding before the end of the year, you may have to give the money back, either in the form of a smaller tax refund or a higher tax bill next spring. Withholding Adjustments: You may also want to adjust your withholding if you have more than one job, both you and your spouse work, you can be claimed as a dependent, or you have taxes withheld from a pension check. Flexible Spending Accounts: This time of year is when you probably need to specify how much salary you’ll contribute to your flexible spending accounts. Not only is it appropriate to review your changing needs, but tax-free withdrawals can then be taken from these accounts for medical, dental and child-care costs. You will forfeit any balance left in these accounts at the end of the year, so take advantage now by filling prescriptions early, making medical or dental appointments, or scheduling elective surgeries. We hope you will find some of these strategies useful as you go through your tax planning process. One of the primary ways we help our clients is by working hard to provide tax-smart investment strategies to minimize the impact Uncle Sam can have. In addition, we consider it our responsibility to educate you about things that could affect your financial future. As always, feel free to contact us with any questions, and to discuss points of interest with your tax professional as there may be crucial details in making your plan effective. It is an honor and a privilege to serve you! chevron federal credit union can be a quick and easy financial solution. But you need to know what to look out for, and how to identify the best deals.
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