The
IRS wants to remind all taxpayers that with the New
Year fast approaching, there is still time for you
to take steps that can lower your 2011 taxes. However,
you usually need to take action no later than Dec.
31 in order to claim certain tax benefits.
Here are six tax-saving
tips for you to consider before the calendar turns
to 2012:
1. Make Charitable
Contributions – If you itemize deductions,
your donations must be made to qualified charities
no later than Dec. 31 to be deductible for 2011. You
must have a canceled check, a bank statement, credit
card statement or a written statement from the charity,
showing the name of the charity and the date and amount
of the contribution for all cash donations. Donations
charged to a credit card by Dec. 31 are deductible
for 2011, even if the bill isn't paid until 2012.
If you donate clothing or household items, they must
be in good used condition or better to be deductible.
2. Install Energy-Efficient
Home Improvements – You still have time this
year to make energy-saving and green-energy home improvements
and qualify for either of two home energy credits.
Installing energy efficient improvements such as insulation,
new windows and water heaters to your main home can
provide up to $500 in tax savings. Homeowners going
green should also check out the Residential Energy
Efficient Property Credit, designed to spur investment
in alternative energy equipment. The credit equals
30 percent of the cost of qualifying solar, wind,
geothermal, or heat pump property.
3. Consider a
Portfolio Adjustment – Check your investments
for gains and losses and consider sales by Dec. 31.
You may normally deduct capital losses up to the amount
of capital gains, plus $3,000 from other income. If
your net capital losses are more than $3,000, the
excess can be carried forward and deducted in future
years.
4. Contribute
the Maximum to Retirement Accounts – Elective
deferrals you make to employer-sponsored 401(k) plans
or similar workplace retirement programs for 2011
must be made by Dec. 31. However, you have until April
17, 2012, to set up a new IRA or add money to an existing
IRA and still have it count for 2011. You normally
can contribute up to $5,000 to a traditional or Roth
IRA, and up to $6,000 if age 50 or over. The Saver’s
Credit, also known as the Retirement Savings Contribution
Credit, is also available to low- and moderate-income
workers who voluntarily contribute to an IRA or workplace
retirement plan. The maximum Saver’s Credit is
$1,000, and $2,000 for married couples, but the amount
allowed could be reduced or eliminated for some taxpayers
in part because of the impact of other deductions
and credits.
4. Make a Qualified
Charitable Distribution – If you are age
70½ or over, the qualified charitable distribution
(QCD) allows you to make a distribution paid directly
from your individual retirement account to a qualified
charity, and exclude the amount from gross income.
The maximum annual exclusion for QCDs is $100,000.
The excluded amount can be used to satisfy any required
minimum distributions that the individual must otherwise
receive from their IRAs in 2011. This benefit is available
even if you do not itemize deductions.
5. Don't Overlook
the Small Business Health Care Tax Credit –
If you are a small employer who pays at least half
of your employee health insurance premiums, you may
qualify for a tax credit of up to 35 percent of the
premiums paid. An employer with fewer than 25 full-time
employees who pays an average wage of less than $50,000
a year may qualify.
And here is one final
tip to remember: you should always save receipts and
records related to your taxes. Good recordkeeping
is a must because you need records to prepare your
tax return, and it will help you to file quickly and
accurately next year.
