"The way we communicate with others and with ourselves ultimately determines the quality of our lives." -Anthony Robbins
Hey, maybe my readers of last week’s Black Friday tips REALLY took it to heart! Apparently, sales from that day were up a whopping 16% from last year, which, as I write this on Monday morning, is driving the stock markets up, up, up.
Of course, this may not quite be the indicator we all might hope it to be — after all, Black Friday is notorious for big sales and for penny-pinchers. I might feel better about our economy’s direction if we get a few quarters of sustained consumer spending, outside of the big sales, under our belts.
This week, I’m hoping you will take my advice equally to heart. With just about one month left in 2011, there are some moves you simply must make. Why? Because right now, the tax picture for 2012 is extremely murky. Congress has just under five weeks to consider a TON of legislation and expiring credits (here’s a list, in case you’re interested: http://www.bankrate.com/financing/taxes/congress-year-end-tax-tasks/ ).
So the smart money should be leveraged to take maximum advantage out of this year’s tax situation. Because the way our political situation is shaping up … well, the only certainty right now seems to be UNcertainty.
The following is how you can make some CERTAIN tax-saving moves — but I will say this: if your income looks to be over $75K this year and you will have significant deductions, then we really should touch base for a planning conversation to ensure you don’t get hit by the AMT.
(618) 532-7223 or email me.
After you’ve done that, read on.
"Real World" Personal Strategy
Newcomb’s Year-End Tax Moves for 2011
As promised, I’ve compiled some information on expiring tax breaks for 2011, as well as some suggested moves to make before December sees its ball-dropping end.
But before I share them with you, please allow me this important disclaimer: it’s difficult to make blanket recommendations to all my clients, simply because everyone’s situation is different. If you are uncertain about taking action on any of this information, well, that’s why we do tax planning — so give us a call in that instance (618) 532-7223.
Disclaimers aside, here are some relatively-easy tax moves you can make before 2012:
Filed under: Increased-Deduction strategy
With one caveat: increasing deductions could cost you if you end up owing under the Alternative Minimum Tax (AMT).
1. Pre-Pay and Accelerate
Mortgage bills, college tuition, property taxes — all of these can add deductions to your bottom line, so cherry-pick some 2012 bills if cashflow allows, and you’ll get to mark them against this year’s taxes (only January’s mortgage payment counts for this, I should hasten to say).
And you can "accelerate" certain expenses like optional medical procedures (dentistry is always a ripe source for procedures to implement, unfortunately ?), again, doing so if cashflow allows.
It’s not just because ’tis the season, but often (if we’re all honest) because the year-end is so close. So, obviously, when it comes to taxes, giving to a nonprofit can be like a money-saving gift to yourself. If you itemize your deductions, you can claim your charitable donations, both of cash or goods.
In fact, if you’re *close* to being able to itemize deductions, making some nice gifts this month can push you over the top into some major tax-savings. And, of course, there’s the added benefit of what happens to YOUR mindset when you give.
Filed under: Buying stuff you already need — and saving on taxes
3. Energy-Savings and Big Cars
We ‘tax people’ have been pounding this drum for a while, for the simple fact that (because of the last "stimulus" package) replacing windows, doors, and HVAC systems– as well as installing new insulation–could net you a $500 tax credit on your 2011 tax bill! Credits always beat deductions. A solar energy system gets a 30% credit with no upper limit.
How about that fancy new vehicle you’ve been eyeing? Or that energy-sucking flatscreen? Buy it before the end of the year, and you are eligible for a deduction on the state and local sales taxes.
But you can’t deduct both state income taxes and general sales taxes, so the deduction is usually most beneficial to our clients who actually live in the no-income-tax states. By the way, this sales tax deduction is scheduled to expire on Dec. 31.
Filed under: Common sense
4. Please stop loaning extra funds to Uncle Sam
Do you intentionally get a big refund each filing season? Quit that! You’re providing Uncle Sam an interest-free loan of your money.
Submit a new W-4 now so that your payroll withholding is more closely in line with your future IRS bill. It could even give you a few extra dollars at the end of the year to spend on holiday gifts!
Oh, and just so you know, it’s growing very likely that whatever Congress decides on tax law changes, payroll calculators may not have time to update by January 1st. This means that even if you request the changes, your withholding may not reflect things until 2012 … but making the change will still impact your taxes — it just might not be obvious until next year..
I hope these are easy, and that they give you some good ideas. Remember– I’m in your corner!
And when in doubt, give us a call.