The IRS wants to remind all
taxpayers that with the New Year fast approaching, there is still time for you
to take steps that can lower your 2011 taxes. However, you usually need to take
action no later than Dec. 31 in order to claim certain tax benefits.
Here are six tax-saving tips for you to consider before the calendar turns to 2012:
1. Make Charitable
Contributions – If you itemize deductions, your
donations must be made to qualified charities no later than Dec. 31 to be
deductible for 2011. You must have a canceled check, a bank statement, credit
card statement or a written statement from the charity, showing the name of the
charity and the date and amount of the contribution for all cash donations. Donations
charged to a credit card by Dec. 31 are deductible for 2011, even if the bill
isn't paid until 2012. If you donate clothing or household items, they must be
in good used condition or better to be deductible.
2. Install Energy-Efficient
Home Improvements – You still have time this year to
make energy-saving and green-energy home improvements and qualify for either of
two home energy credits. Installing energy efficient improvements such as
insulation, new windows and water heaters to your main home can provide up to
$500 in tax savings. Homeowners going green should also check out the
Residential Energy Efficient Property Credit, designed to spur investment in
alternative energy equipment. The credit equals 30 percent of the cost of
qualifying solar, wind, geothermal, or heat pump property. For details see
Special Edition Tax Tip 2011-08, Home Energy Credits Still Available for 2011
on the IRS.gov website.
3. Consider a Portfolio
Adjustment – Check your investments for gains and
losses and consider sales by Dec. 31. You may normally deduct capital losses up
to the amount of capital gains, plus $3,000 from other income. If your net
capital losses are more than $3,000, the excess can be carried forward and
deducted in future years.
4. Contribute the Maximum to
Retirement Accounts – Elective
deferrals you make to employer-sponsored 401(k) plans or similar workplace
retirement programs for 2011 must be made by Dec. 31. However, you have until
April 17, 2012, to set up a new IRA or add money to an existing IRA and still
have it count for 2011. You normally can contribute up to $5,000 to a
traditional or Roth IRA, and up to $6,000 if age 50 or over. The Saver’s
Credit, also known as the Retirement Savings Contribution Credit, is also
available to low- and moderate-income workers who voluntarily contribute to an
IRA or workplace retirement plan. The maximum Saver’s Credit is $1,000, and
$2,000 for married couples, but the amount allowed could be reduced or
eliminated for some taxpayers in part because of the impact of other deductions
and credits.
5. Make a Qualified Charitable
Distribution – If you are age 70½ or over, the
qualified charitable distribution (QCD) allows you to make a distribution paid
directly from your individual retirement account to a qualified charity, and
exclude the amount from gross income. The maximum annual exclusion for QCDs is
$100,000. The excluded amount can be used to satisfy any required minimum
distributions that the individual must otherwise receive from their IRAs in
2011. This benefit is available even if you do not itemize deductions.
6. Don't Overlook the Small
Business Health Care Tax Credit –
If you are a small employer who pays at least half of your employee health
insurance premiums, you may qualify for a tax credit of up to 35 percent of the
premiums paid. An employer with fewer than 25 full-time employees who pays an
average wage of less than $50,000 a year may qualify. For more information see
the Small Business Health Care Tax Credit page on IRS.gov.
And here is one final tip to
remember: you should always save receipts and records related to your taxes.
Good recordkeeping is a must because you need records to prepare your tax
return, and it will help you to file quickly and accurately next year.
For more year-end tax information
and to access all IRS forms and publications, visit the IRS website at http://www.irs.gov.
Links:
- Publication 526, Charitable Contributions
- Special Edition Tax Tip 2011-08, Home Energy Credits Still Available for 2011
- Publication 590, Individual Retirement Arrangements (IRAs)
- Publication 550, Investment Income and Expenses
- Retirement Topics, 401(k) and Profit-Sharing Plan Contribution Limits
- Small Business Health Care Tax Credit for Small Employers
Source: IRS.gov
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