Instead of waiting until April 15 looms large, why not keep your taxes in mind all year long? Planning and taking the proper steps today can help save you money and time tomorrow, whether you’re rolling over your IRA or investing in exchange traded funds (ETFs).
Some tax planning ideas for 2010 include:
- Higher-income taxpayers and investors should consider that long-term capital gains rates could go up, so it may pay for some to take large profits this year.
- For businesses, tax planning should consider: 50% bonus first year depreciation for most new machinery, equipment and software; the $250,000 expensing limitation for qualified asset purchases; the research tax credit; and the 15-year writeoff for qualified leasehold improvements, qualified restaurant buildings and improvements and qualified retail improvements.
- Increasing the amount you set aside for this year in your employer’s health flexible spending account (FSA) if you set aside too little last year.
- Realize losses on stock while preserving your investment position. You can sell the original holding, then buy back the same securities at least 31 days later. [All about tax loss harvesting.]
- Postpone income until 2011 and accelerate deductions into 2010 to lower your 2010 tax bill. This strategy may enable you to claim larger deductions, credits, and other tax breaks for 2010 that are phased out over varying levels of adjusted gross income (AGI).
- If you believe a Roth IRA is better than a traditional IRA, and want to remain in the market for the long term, consider converting traditional-IRA money invested in de-valued securities into a Roth IRA if eligible to do so.
- If you own an interest in a partnership or S corporation you may need to increase your basis in the entity so you can deduct a loss from it for this year.
- Estimate the effect of any year-end planning moves on the alternative minimum tax (AMT) for 2010, keeping in mind that many tax breaks allowed for purposes of calculating regular taxes are disallowed for AMT purposes.
- If you are self-employed and haven’t done so yet, set up a self-employed retirement plan.
- You can save gift and estate taxes by making gifts sheltered by the annual gift tax exclusion before the end of the year. You can give $13,000 in 2010 to an unlimited number of individuals but you can’t carry over unused exclusions from one year to the next.
These are just some of the year-end steps that can be taken to save taxes.
R. Lee Haight, CPA, is a partner in Allen, Haight & Monaghan, located in Irvine, CA.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.