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Friday, October 29, 2010

Tips for End of Year Income Tax Planning

With only two months to go before the end of the year, it's time to think about short term income tax planning. Here are some things to consider, especially if you itemize deductions.
  • Pay your mortgage payment due in January 2011, in December 2010. This will shift the interest tax deduction amount for that payment to be applied on your 2010 tax return rather than your 2011 return.
  • Prepay local and state income taxes so you can take that deduction this year.
  • Prepay charitable contributions that you would normally make in 2011 to increase your deduction in 2010.
  • If you are self-employed or have some type of business, stock up in December on office supplies and equipment such as computers so you can take the business expense deduction in 2010.
  • If you have had heavy medical expenses in 2010 but don't expect the same in 2011, consider prepaying things such as medical insurance in 2010 in case you qualify for a medical deduction. Visit the doctor, dentist and have those tests run in December instead of January.
  • If you have a flexible health spending account with your employer, make sure to spend all that's available in the account.
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