IRS Tips to Reduce 2011 Taxes
In the middle of rushing, don't neglect to do the important things before December 31.
The Internal Revenue Service knows that you are rushing right now to make last-minute donations to your favorite charities, which certainly helps reduce your taxes.
In the process, givers may forget some obvious things, including other things that can be done to help you in this mad dash to the December 31 deadline.
1. Make charitable contributions.
If you itemize deductions, 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 made using your credit card are OK. Just be sure to keep all your records for quicker and more accurate filing.
2. Install energy-efficient home improvements.
Making energy-saving and green-energy home upgrades is always popular. There are two home energy credits you can take advantage of, but you have to make the purchases and/or the changes to your home before the end of this week. For example, installing energy-efficient improvements such as insulation, new windows and water heaters to your main home can provide up to $500 in tax savings. See this link for more information from the IRS on available credits.
3. Consider a portfolio adjustment.
It's been a turbulent time for investments. And, if you haven't checked them in a while, now is the perfect time. Capital losses can be deducted, normally up to the amount capital gains (plus $3,000 from other income). Other losses can be carried forward. Contact your place of investment before its too late.
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. Yippie. For low- and moderate income workers, be sure to check out the Saver's Credit (Retirement Savings Contribution Credit). For more information on this, click here to be taken to IRS.
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 is $100,000. This a good grab, especially because you do not have to itemize deductions to take advantage of it.
6. Don't forget 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 on this credit, click here.