Year End Tax Tips for 2011

Should You Take Action Before the Close of 2011?

The key to end of year tax planning is actually quite simple - Look at the overall impact over two years; 2011 and 2012.  The goal is to cut your tax bill over the total of both years, not just one.  Most filers can save by accelerating write-offs from 2012 to 2011, and deferring income, if possible, from 2011 into 2012.  If you will be in a higher bracket in 2012 consider doing the opposite. 

Itemizers have the greatest flexibility:
State & Local Taxes - Mailing your January 2012 estimated payments in late December allows you to claim the deduction in 2011.
Donations - You may accelerate them and claim a deduction in 2011 if you charge them or postmark them by 12/31/11. Also, consider gifting appreciated stock you have owned for over a year. You can deduct the full value of the stock as a contribution and you won't pay tax of the appreciation as if you had sold the stock.
Mortgage Interest - Making your January 2012 payment on your mortgage before 12/31/11 will give you the additional interest as a deduction in 2011.
Medical Expenses - If you know you have exceeded 7.5% of your adjusted gross income in medical expenses, consider having and paying for those elective procedures you've been putting off before year-end.

Some filers can hop in and out of the standard deduction from year to year.  If your 2011 itemizations fall shy of the standard deduction amount, try delaying some into 2012, when you may be able to itemize. If the 2011 total already exceeds the standard amount but you’re not sure you will for 2012, try to accelerate some into 2011. 2011's standard deduction is $11,600 for Joint filers, $5,800 for Singles, and $8,500 for Heads of Households.

If you know you may fall victim of the Alternative Minimum Tax ignore all this!!  It's complex so please call us. 

Your investment portfolio provides a bunch of potential tax saving opportunities. Investors with Capital Loss Carry forwards should consider harvesting some gains where they may not be taxed.  But watch out if you are considering buying mutual funds late in 2011. If it pays a dividend after you purchase it, you will owe tax on the dividend even though you haven't experienced the full advantage of the dividend. You're better off waiting to purchase the shares after the dividend record date..

If you are at least 70 1/2 in 2011, don't forget to take your Minimum Required Distribution (RMD) from you retirement plans. Not doing so will cause you to incur unnecessary penalties. 

Please visit us at www.alphafingroup.com or call us at 860-436-6546

Happy New Year and Happy Tax Filing Season!!