As we rapidly approach the end of the year, it is impossible to over emphasize the importance of tax planning. Taxpayers are always looking for savings opportunities during March and April, but many opportunities for tax reduction rely on planning and strategy throughout the year. With the year already more than half over, time is running short to take advantage of opportunities for planning that will impact your 2011 tax bill.
2010 brought significant changes to the tax code, which created opportunities to reduce tax liabilities–but Uncle Sam isn’t going to identify and take advantage of these opportunities for you. Sharing your business planning and personal situation with a qualified advisor who is up to date on the opportunities is the best way to ensure you receive all of the available benefits and incentives. We are ready to have this conversation as soon as you are. The opportunities are real, and the benefits could be substantial.
Here are a few of the top planning opportunities for 2011. Identifying a couple of items that directly relate to your situation could provide tax savings and help you avoid compliance problems down the road.
Business Planning Ideas
Fixed Asset Planning
2010 tax legislation created valuable incentives for making qualifying purchases in 2011. If you are considering expansion or simply replacing some old equipment, you need to consider the current depreciation benefits. The current level of benefits provided by Section 179 and bonus depreciation are temporary and could be a reason to make your plans for 2011. You can read more about these depreciation based incentives here:
New Opportunities from General Business Credits
Congress recently changed the way general business credits can be applied for flow through small businesses. In previous years, general business credits could not offset the alternative minimum tax (AMT) for individuals. For many taxpayers, that meant that general business credits had little value. But as of 2010, general business credits can now offset AMT. That means many previously useless credits will now translate into real money. Even if you have never claimed a general business credit, there might be substantial new opportunity. There are many various credits available. Could one of them be a fit for your organization?
Planning Ideas for Individuals
IRA and Retirement Planning
It’s never a bad time to think about your future. You can’t control the markets, but you can control how and when your savings will be taxed. Changes in the law have created new opportunities that might help you in the long run. A ROTH conversion might pay big dividends. We can help you analyze available alternatives and select the right plan for your future.
Estate Planning and Gifting
The 2010 Tax Relief Act provided an increased exemption for gift and estate tax. For the next two years, the exemption is set at $5 million for individuals and $10 million for married couples. With future exemptions and estate tax rates uncertain, you should consider taking advantage of this provision while it’s available. Estate tax rates and the exemption amounts are set through 2012, but uncertainty and the possibility of dramatic increases looms around the corner. Now is the time to take advantage of current opportunities, while ensuring that you’ve planned for future uncertainty.
Tax Credit for Education
If you spent on higher education this year, you may be eligible for up to a $2,500 tax credit this year and next year as well. However, there are restrictions to the credit. Talk to us to find out if you are eligible.
There are some tax breaks that you should be thinking about every year: deductions related to mortgage interest and points paid on refinancing; money donated to charity; mileage deductions when you travel on behalf of working for charity. Other great tax breaks include those related to your home office and home business. You can also get deductions for medical expenses you pay out of pocket. Document your co-pays, prescriptions, and other out of pocket expenses that the insurance company doesn’t cover. Then, if it amounts to 7.5% of your AGI you can deduct it.
College Financial Aid
Do you have a high school junior or senior? If so, regardless of your income level most likely you will have to submit the dreaded financial aid forms in March. We can answer basic questions about the financial aid formulas and assist with planning your income to maximize any potential aid packages. Remember, financial aid forms are based on income and assets, as of 12/31, so now is the time to make any adjustments.
Even with fall approaching, there’s still time to look for savings opportunities. Please give us a call today to get started on your 2011 planning.