Tax-savvy ways to wrap 2010
For you, or your small business, the end of October should signal a great time to examine your gains and losses and take advantage of some tax savvy tips to reduce your income and knock down your taxes due.
Donate for good and a tax refund
Clean out your closets and not only do you make room for either post holiday sales or clothing gifts, but you can also get a tax-break from donating your unwanted things. Not to mention helping get gently used clothing or sports equipment to people who really need it.
Go see the dentist
If you have a flexible spending account at work for medical/dental expenses, use it or loose it. Make sure your teeth, eyeglasses, contacts are in shape or start the season with a clean bill of health from an annual physical. And for next year estimate any large dental work or tests you may need to reach the cap on this account—and reduce your overall income for 2011 in the process.
Get your small biz in gear
Especially if you turned a profit in 2010, you can still set up an appropriate retirement plan that will allow you to make contribution. Small business plans like SEP, Keogh, or Money Purchase Plan are all retirement plans that may be set up before year end. If you already have a retirement fund, like a SIMPLE 401(k), make sure you max out your contributions for year end savings. If you provide any sort of healthcare, make sure you take advantage of any healthcare credits you’re eligible to take.
Max out your 401(k)
If you can increase your pre-tax contributions to your 401(k)–you’ll lower your overall income for next year’s taxes. Check with your plan administrator to check your maximum contribution level.
Cha-cha-change your IRA
If you earn under $95,000, you may want to convert your traditional individual retirement account (IRA) to a Roth IRA. Roth allows tax free withdrawals when you retire and there are no minimum withdrawal requirements. If do convert, you can spread the conversion income claimed over 2011 and 2012.
What will you be doing before year-end to reduce your own tax footprint?