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Tax Thoughts at the End of 2011
Here is a quick list of things to do by December 31st:
Parents paying college costs will want to plan to take full advantage of the American Opportunity Credit, which has been extended into 2012. The credit is 100% of the first $2,000 of qualifying expenses plus 25% of the next $2,000. Qualifying expenses are tuition, books, supplies, and equipment such as computers and printers. If you haven't already paid $4,000 in 2011, you will want to pre-pay some January expenses to take advantage of the full credit. If you have already paid $4,000, you might want to wait until January to pay more.
If you make regular donations to charity, consider making your January contribution early. Also, those used clothes, furniture, books, etc. that you've been meaning to donate to charity must be dropped off by Saturday, December 31st. Make a list of the items donated, and attach it to the receipt that you receive from the charity.
You can make your January 1st mortgage payment a week early so that the interest deduction fall in this year. Also, if you are certain that you are not in the alternative minimum tax, you may want to pay all of your 2011 California tax by 12/31/11.
If you have been fortunate enough to sell stocks at a profit during 2011, see if you can sell losing stocks to offset the gains. If you don't want to be out of the market, talk to me about lateral moves which get around the wash sale rules. You can deduct up to a $3,000 net loss in 2011.
The tax credit for adding energy-efficient items to your home (insulation, windows, etc.) is still with us for 2011, but with a $500 lifetime cap. So if you took advantage of this tax credit previously, you probably don't have room for more in 2011. If you do, be sure that your improvements are purchased and installed by the end of the year.
The tax credit for alternative energy equipment, such as solar, has no cap, and goes through 2016 . Again, to qualify for a 2011 tax credit, items must be installed by December 31st.
If you have a "high-deductible" medical insurance, consider opening a Health Savings Account. You have until next April 15th to set up and fund the account, so this isn't technically a "year-end" tax planning item.
The above ideas apply to most people. Additional information for special situations is at:
I wish you and yours safe and happy new year.
Bess
Burlingame - San Mateo - Foster City CPA Since '88
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