Year-End Tax Planning
As we head into the heart of December, it’s time to start planning year-end tax strategies. There are several ways to maximize your 2009 savings by minimizing your taxable income through smart deductions. Below are a few tips:
- Retirement contributions: If you haven’t already reached the limit, now is the time to max out your contribution to your corporate 401K account. If you don’t work for a company, you might also consider contributing to a traditional IRA or SEP (self-employed) IRA. Your CPA can help you identify which retirement plans must be funded before the end of 2009, and which can be funded after the New Year.
- New vehicle deductions: Are you planning to buy a new car, truck, motorcycle, or RV in the coming year? If you complete the purchase before the New Year, you may be eligible to write off the sales tax as a deduction, depending on the amount of your total household income.
- Homebuyer and homeowner credit: In 2009, legislature was passed that granted first-time home buyers up to $8,000 in tax credits. This deduction is limited to taxpayers who have not bought a home in the last three years and whose incomes are below the maximum limit. If you’re planning to purchase a home in the near future, doing so before the end of the year will increase your 2009 tax savings. In addition, current homeowners may be eligible to deduct up to $6,500 in tax credits.
- Eco-friendly appliances: Federally funded programs are offering special rebates for appliances—furnaces, dishwashers, refrigerators, and washers and dryers, among others—that have earned an Energy Star rating for environmentally friendly design. Rebate values vary by state, ranging from $50-$200 per product, so be sure to check with your CPA for details.
- Business expenses: If you own a business or do independent consulting work, now’s the time to tally up your receipts and determine the amount that can be deducted as work-related expenses. If you’re anticipating any large business purchases in the coming months, you might consider making them now to boost your deductions. Your CPA can also help you analyze how depreciation schedules might impact your tax situation.
Remember, every situation is different, and this is just a sampling of end-of-year tax considerations. To make sure you’re taking advantage of all eligible tax deductions, it’s best to consult with a qualified tax professional. With the proper planning and guidance, you can kick off the New Year with some extra cash to spare.
