Unwrap These Tax Breaks Before They're Gone
While organizing for taxes isn't everyone's cup of tea, taking the breaks you have coming could be the best present you give yourself this season.
Use the words 'tax planning,' especially as the glow of Christmas is still in the air, and it's likely to clear a room. However, while it still is 2011, there are things you can do to make sure your refund makes it feel like Christmas is coming again, or that what you owe isn't nearly as daunting.
What you should try to take care of now (before Dec. 31):
- Pay tax deductible expenses in such as medical bills, charity donations and property tax.
- Sell off stocks and other investments that have lost value so you can take the losses on your 2011 return.
- Increase your 401(k) or IRA contributions.
What you're better off waiting on until 2012:
- Paying medical bills, charity donations, property tax and other deductions.
- Consider funding a Roth IRA instead of a tax-deductible traditional IRA. By forgoing the deduction, you'll be locking in a known tax rate on your contribution in return for tax-free investment returns.
There are also several tax breaks that expire at the end of 2011, so take the tax break while you can. Some notable examples:
- Classroom expense deduction - Teachers can deduct up to $250 for books, supplies and other related expenses.
- Mortgage insurance premiums
- Sales tax deduction - This is an optional itemized deduction that can be taken instead of the deduction for state and local income taxes paid.
- Tuition deduction - Up to $4,000 in tuition can be deducted, and amounts paid in 2011 for classes starting in early 2012 can qualify for a deduction on your 2011 tax return.
More Year End Ideas