Tis the Season: Year End Tax Tips
Lee Rosenberg, CFP | November 24th, 2009Every year at this time, I urge clients to give some thought to moves they could make between now and the end of the year to reduce their tax burden. It always surprises them that they have so many options. Here are some possible tax-reducing opportunities to consider:
Deferring Income: If you are expecting a year-end bonus, for example, and can take it in 2010 instead, this may put you in a lower tax bracket for 2009. Or if you are self-employed, can you defer billing until 2010?
Accelerate Deductions: If you have deductible expenses that can be paid in December versus January, that could mean big savings (unless you are subject to the alternative minimum tax, which can disallow a number of itemized deductions). If possible, you can also make higher contributions to your retirement plans and pay your January mortgage in December.
Required Minimum Distributions: If you are 70 ½ or older, don’t forget that the required minimum distributions were suspended for 2009. This means you can postpone the receipt of taxable income, which represents a savings.
Roth IRA Conversion Rules: Starting in 2010, traditional IRAs can be converted to Roth IRAs and the adjusted gross income limit of $100,000 lifted. Also, if you are employed but not eligible to contribute to a Roth IRA, you can make nondeductible contributions to a traditional IRA for 2009 in anticipation of moving it into a Roth next year.
Other Tax Tips:
o An $8000 tax credit is offered to qualified first time homebuyers if the purchase is made before December 1, 2009
o The first $2400 of unemployment compensation received in ’09 is excluded from income for federal income tax purposes
o 2009 is the last year to deduct state and local sales taxes in lieu of state and local income taxes for those who itemize deductions
o If you purchase a new car, light truck or motorcycle by December 31, 2009, there is still an allowable deduction for sales and excise taxes for the first $49,500.
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Tags: 2010 tax deductions, 2010 tax planning, 2010 tax tips, lee rosenberg, lee rosenberg cfp, tax bracket, tax burden, tax reduction, Taxes
About the Author: Lee Rosenberg is the Co-founder of ARS Financial Services, Inc. As a Certified Financial Planner with more than 34 years of solid financial expertise. Lee is a registered representative of Cadaret, Grant & Co., Inc. He was also named one of the top 25 Independent Financial Advisers in the US by Rep magazine.
