Last-minute moves to cut your taxes
The holidays are approaching fast. And my gift to readers is a gentle reminder to make those last-minute tax moves.I say this every year: Your tax planning for your 2011 return should have started last December. It's more complicated this year because tax laws have changed again. They always do.Still, there are moves you can and should make before Dec. 31 to trim your 2011 tax bill.Let's start with the simple things.The easy stuff Education tax credits for 2010 Charitable donations. If you contribute to your church, your college, the local dog pound, the United Way, organizations that help with disaster relief or whatever, make these donations before Dec. 31.And make sure, before you file your tax return, that you have a receipt from the organizations that benefited from your generosity.If you don't have the cash, find out whether the organization can process a donation via credit card. As long as the donation is made by Dec. 31, it's valid as a 2011 deduction, even if you don't pay the bill until next year.Jeff SchnepperSeparately, any contributions of clothes or household goods must be in good condition or better to qualify for a deduction. If a single item has a value of $500 or more, an appraisal is required. The Internal Revenue Service can deny a deduction for items of minimal value.Complicating any deductions are the requirements on record keeping. This is important.To deduct a cash donation, regardless of the amount, you must have a bank record or a written communication from a charity showing the name of the charity and the date and amount of the contribution. Acceptable bank records include canceled Rosetta Stone checks or bank or credit union statements containing the name of the charity and the date and amount of the contribution.Your flexible spending account, or FSA. This isn't exactly a tax savings, but if you don't use the dollars you contribute to a flex plan, you lose them. The IRS allows purchases made up through March 15, 2012, to count. Your employer can give you a debit card for your FSA spending. That eliminates a whole lot of paperwork. In the past, you could even pay for nonprescription drugs through an FSA. But Congress changed the rules again, and 2010 was the last year nonprescription drugs qualified. Now, only prescription drugs and insulin can be paid tax-free out of your FSA.Be careful, though. Unless your employer's plan also is amended to allow the March 15 extension, you won't qualify.Mortgage interest. Make your Jan. 1, 2012, mortgage payment by Dec. 31, 2011. Remember to add the extra interest paid to what your bank reports on its Form 1098 -- it'll get your payment in 2012 and won't report it for 2011. But you paid it in 2011, so it adds to your deduction this year. (The downside is that you won't be able to deduct the payment from your 2012 return. But offset that with a payment of your January 2013 mortgage in December 2012.)Real-estate taxes. If you pay your own real-estate taxes, make any payments due in the beginning of 2012 by Dec. 31, 2011. My fourth-quarter real-estate tax is due Feb. 1, 2012. By paying before the end of 2011, I can get the deduction a year earlier. (Again, you can't deduct payments made in 2011 from your 2012 return.)One note: Taxes aren't allowed as a deduction under the alternative-minimum-tax computation.
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