1. Sell appreciated assets
Capital Gains taxes are now at historic lows but soon that may change so cash in any stocks or assets with lots of appreciation before 12/31 this year and lock in those low rates. Just remember that while they may not end up raising capital gains rates you can be sure they won’t be lowering them. So the best tax rate you will see on Capital Gains is here NOW and that may not be true after Jan1, 2011.
2. Review charitable giving
Giving has always been a good way to lower taxes and be sure your money goes to those groups and purposes you want to see supported. And this year offers an additional incentive for high income givers. For under the Bush tax cuts deductions for giving were gradually phased out and finally ending in 2010. That means that this year no limits exist for how much you can give and get full credit on your Schedule A. This is one of those Bush era tax reductions that are not likely to remain. So you could lose a large tax deduction if you wait to make any large contributions till after the 1st of the year. Just be sure to check your status under the Alternative Minimum Tax rules or you still might get an unpleasant tax surprise.
3. Convert to Roth retirement accounts
Converting to Roth IRA and 401k programs is always something to be considered and in this regard this year is no different. But there is a couple of special tax breaks for doing so this year that won’t be around later. For this year and this year only you can convert from a regular account to a Roth account (in most cases) without the $100,000 income threshold and you can defer paying any taxes due till 2011 or 2012.
4. Energy efficiency tax credits
Be sure and look at the energy tax savings for home improvements and while it’s almost too late to get them done so you can take them it’s still possible. And remember you can’t take them this year if you’ve used the maximum total allowed in previous years and the work MUST be done this year not just contracted for so if you want to qualify you must take action immediately.
5. Adjust withholding
And for those of you who always end up getting a large refund it’s time to consider making changes in your withholding to reduce that free loan you’re making every year to the Federal government. Just remember to talk to a tax professional before you do as there are so many law changes coming you don’t want to get it wrong and end up owing. Especially watch for the end or reduction to the child tax credit to make some big reductions in your possible tax credits.
Disclaimer: And as always remember this advice is only offered as a suggestion of possible tax credits and savings and they may or may not apply in any individual case. So any actions you take with regard to tax deductions and credits require careful consideration of all the facts and circumstances that are unique to your return. There are many issues that may reduce or eliminate your benefits or use of some or all of them. As always it is suggested that you consult with a tax professional aware of your return and how any special circumstances you have may affect your ability to benefit from these or any other suggested tax planning strategies.