It is that time of year where people begin to wonder what they can do to reduce their taxes. Here are some ideas for your business:
- There is the ever popular purchasing of business property. Unless Congress changes the rules, 2011 is the last year where the expensing limit is at $500,000 and the investment ceiling is at $2,000,000. In 2012 the expensing limit will fall to $139,000 and the ceiling will drop to $560,000. And the very popular 100% first-year write off won’t be available either. So if you need business property buying it in 2011 makes sense.
- Set up a self-employed retirement plan if you have not all ready done so
- Consider paying expenses with your credit card.
- If your business is a Partnership, an LLC or an S-Corp, consider increasing your basis in order to take advantage of a loss from the business this year.
Here are some ideas for you individually:
- Maximize your health savings account contribution.
- If you converted a traditional IRA to a Roth IRA earlier in the year and the Roth has declined in value, consider re-characterizing the Roth IRA back to a traditional IRA so you don’t have to pay taxes on an amount that is no longer available.
- Defer your bonus until 2012, this one makes me laugh. I have never had anyone request their employer not pay them a bonus until the next year, the risk the employer might not pay them a bonus strikes fear into the average person’s heart!
- If you expect to owe taxes to the state consider having additional withheld from your paycheck, so you will get the deduction for state income tax paid instead of waiting until April to pay it and then not getting to take the deduction until filing the 2012 tax return.
- Unless Congress extends it, the above the line deduction for qualified higher education expenses will not be available after 2011, consider prepaying eligible expenses if doing so will increase your deduction. You may need the help of a tax professional to determine this, but you still have time to set up a meeting and discuss it with them.
- If you are 70 1/2 or older, own an IRA and are thinking of making a charitable gift, consider arranging for the gift to be paid directly by the IRA trustee.
- Don’t forget to take your required minimum distribution from your IRA or 401(k) if you have reached 70 1/2.
- Consider giving a $13,000 gift to an unlimited number of individuals and take advantage of the annual gift tax exclusion