We are only two and a half months away from 2011! Some families are realizing that they do not have a lot of time to enact some tax savings before the year is out. We're here to help! It appears that 2011 is headed for higher taxes, below are the top five ways to do some tax saving before the year is over:
1. Sell stock. A smart tax strategy is to sell some highly appreciated stock/stock funds before the end of the year and pay capital gains at the lower rates in 2010. Often, the tax bite can be mitigated by also selling some of your “losers” at the same time, thereby offsetting some of the gains with the losses.
2. Charitable giving. Charitable giving is always a great way to save on taxes and do some good! Gifting appreciated stocks to your favorite charity(s) is also a great tax savings tool. The charity gets the fair market value of the stock transferred and you get the tax deduction and it saves you the capital gains taxes.
3. Tax sheltered giving. Tax sheltered plans are one of the best gifts that Uncle Sam has ever given us. A person 50 and older can defer $22,000 into his/her 401k, 403b, and 457 plans for 2010 and everyone else can defer $16,500. This results in significant tax savings for you, the investor. Check your current pay slip and see how much you are on track to contribute for 2010. If you will not meet the above maximums, ask your HR department to increase the monthly amount so that you can take advantage of these limits and save BIG on taxes.
4. Invest in a Roth Conversion. Roth conversions are in the news this year. For the first time ever, folks making $100,000 or more can covert their traditional IRAs to Roths this year. Yes, taxes will be due on the converted money but Uncle Sam has also given us another nice gift. You can pay the taxes over a 2 year period. That really helps take the sting out of the tax bite. An interesting provision in the recently signed Small Business Bill is that employer tax sheltered plans can now allow their employees to do Roth Conversions of their 401k, 403b and 457 plans. If this is of interest to you, check with your HR department for the details.
5. 2010 Tax Energy Credits. The personal energy tax credits expire at the end of 2010. If you are planning on getting more energy efficient windows and/or doors or installing heating or cooling units, then please do so before the end of 2010 and get up to 30% of the purchase price as a tax credit for the year. Credit tops out at a generous $1500.
Please feel free to contact us for more information if you need any more information or assistance on how to implement any of these tax savings strategies.
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