Personal Year-End Tax Planning 2011
It's been a bad year
Tax planning in a bad year has two approaches: First, because of the special deal on capital gains, you may want to create as much capital gain as possible and keep other income low. Or second, maybe you want to drag income into 2011, since you are in a low tax bracket.
Capital Gains in 2011 (subject to change, of course)
The special rates on capital gains have been extended into 2011. If your other income is low enough, your long-term capital gains may be taxed at 0%. That's no federal tax at all. So this might be the time to sell that stock or property you've had for a long time.
Dragging Income into 2011
If you have assets in a traditional IRA, you may want to do a Roth IRA conversion no later than 12/31/11. The whole transfer will be taxable (unless you made non-deductible contributions) but this is a good year to show more income, right?
If you've recently sold stocks at a loss, consider using the wash sale rules to kill the losses and so increase your 2011 income.
Other Ideas for a Bad Year
The federal Savers Credit rewards low-income people who put money into a retirement plan. If you have the cash, this could be a great idea.
If you've been collecting unemployment, be sure to have your taxes calculated early to avoid surprises.
You may also want to look at these pages:
Bess Kane, CPA
Burlingame - San Mateo - Foster City CPA Since '88
Answers to many of your tax questions can be found here
If you have a tax question that you think other people would be interested in, send it to me. If I use it in my Tax News Blog or on my General Tax Info Page,I'll send you a Starbucks card!
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