Planning is essential to reap the biggest benefit in tax savings.
Virginia Beach, VA (PRWEB) November 28, 2011
Time is running out for taxpayers to plan and take advantage of some tax-saving breaks for the upcoming tax year. Liberty Tax Service advises you to examine these expiring measures and make your best tax moves while you can.
“Planning is essential to reap the biggest benefit in tax savings,” said John Hewitt, CEO and Founder of Liberty Tax Service.
Purchases and Expenses to Consider Now
- Make an extra mortgage payment: Extra payments in 2011 mean more deductible mortgage interest.
- Pay state and local income taxes now: That way you can deduct them for 2011.
Check Your Medical and Health Expenses
If you have a health flexible spending account (FSA) through your employer, increase the amount you set aside for next year. If you have a health savings account (HSA), you can make all contributions for 2011 up to the due date of the return not including extensions.
Taxpayers should check to see if they have enough medical deductions to itemize (over 7.5% of AGI) this year. It’s not too late to schedule additional dentist or eye doctor appointments before the end of the year. It may, instead, make sense to “bunch” medical deductions into one year, and plan ahead for 2012. There are numerous medical costs that are deductible including Lasik eye surgery, doctor-prescribed weight loss programs, and capital expenses for ramps, railings, etc. installed in a home to accommodate disabilities. IRS allows the cost of smoking cessation programs as a medical expense, but not the costs of patches and gums. Don’t overlook medical mileage to and from doctors, hospitals, and the pharmacy at 19 cents a mile from January 1-June 30 of this year. The rates increased to 23.5 cents a mile from July 1-December 31 of this year.
If you’re self-employed, buy supplies now: Self-employed taxpayers who use the cash method of accounting can pay bills on or before December 31, 2011 and claim the expenses on a 2011 return. Stock up on necessary supplies and equipment. Remember to take advantage of the section 179 deduction for computers and other big ticket items put into service before the end of this year. For 2011, small businesses can expense up to $500,000 of the first $2 million of business expenditures considered section 179 expenses. There’s also 100% special depreciation on assets purchased and placed in service after Sep 8, 2010 and before January 1, 2012. For 2012 the special depreciation is 50% (as it was prior to September 9, 2010) and then special depreciation under current legislation will expire after December 31, 2012
Retirement Planning for 2011 Taxes
Add to your retirement accounts any time before April 17, 2012: The deductible amount for a contribution to a traditional IRA is up to $5,000 per person, up to $6,000 per person if age 50 or older. Workers age 50 or older can make additional contributions to their SIMPLE IRAs up to $2,500. If you’re self-employed, you can set up an Employee Pension plan and contribute the lesser amount of up to 20% of your net income or $49,000 before April 17, 2012.
Stock Sale Planning: Sell “loser” stocks. Perhaps you have experienced a stock market slide that has affected your portfolio during Wall Street’s rocky ride this year. There’s still time to sell stocks or mutual funds and take the losses to offset your income, and even buy the same stocks and securities again after 31 days.
Charitable and Gift Giving
Make Charitable Contributions and Donations before the End of the Year: Generally, for individuals, contributions to tax-exempt charitable organizations are limited to 50 percent of the taxpayer’s adjusted gross income for the tax year. Those unused items cluttering closets can be donated to a qualified charity or non-profit organization and deducted as charitable contributions. However, these items must be in good, used condition or better. Document your donations by saving receipts, cancelled checks and any letters or correspondence from the charity.
In the spirit of the holiday season, remember that you can give gifts of up to $13,000 to individuals before the end of the year. This measure will save gift and estate taxes by sheltering them from by the annual gift tax exclusion.
About Liberty Tax Service
Liberty Tax Service is the fastest-growing retail tax preparation company in the industry’s history. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 9,000,000 individual income tax returns. With 42 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service.
Liberty Tax Service is the only tax franchise on the Forbes “Top 20 Franchises to Start,” and ranks #1 of the tax franchises on the Entrepreneur “Franchise 500.” Each office provides computerized income tax preparation, electronic filing, and online filing through eSmart Tax.
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