As the clock ticks toward 2012, it also erases the minutes left for taxpayers to take steps to reduce their taxes. The Internal Revenue Service Thursday released a list of suggestions people can use to trim taxes they will have due in mid April.
The few suggestions must be implemented by midnight December 31, 2011 to count on this years taxes.
Dan Boone of the IRS says, “Taking steps now could save you money when you file your taxes next year.” He says taxpayers can: (the links take you to more information and forms at IRS.GOV)
1. Make Charitable Contributions – Most donations must be made before 2012 begins to be deductible for 2011. Donations charged to a credit card by Dec. 31 are deductible, even if the bill isn’t paid until 2012. Canceled checks, a bank or credit union statements, a credit card statements or written statements from the charity will be needed to prove the date and amount of each contribution.
2. Install Energy-Efficient Home Improvements – Homeowners might qualify for either of two home energy credits by making energy-saving and green-energy home improvements. Energy efficient insulation, new windows and water heaters can provide up to $500 in tax savings. Homeowners going green should also check out the Residential Energy Efficient Property Credit.
3. Contribute the Maximum to Retirement Accounts – Deferred payments must be made by December 31, 2011 to:
– employer-sponsored 401(k) plans
– workplace retirement programs like the 403(b) plan for public school employees
– some tax-exempt organizations
– a governmental 457 plan for state or local government employees
– the Thrift Savings Plan for federal employees
Taxpayers 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.
4. Consider a Portfolio Adjustment – Investments need to be checked for gains and losses and sales must be made by Dec. 31. Capital losses can often be deducted up to the amount of any capital gains, plus $3,000 from other income. Net capital losses more than $3,000 can generally be carried forward as deductions in future years.
5. Make a Qualified IRA Charitable Distribution – Individuals age 70½ or over can exclude up to $100,000 from gross income that is paid directly from their individual retirement accounts to a qualified charity. This tax benefit is currently set to expire after Dec. 31, 2011.
6. Alabama Tornado Victims May Be Able to File Casualty Loss Claim – people with property damaged during the April 2011 storms could claim a casualty loss on their tax return. The property must be in a county declared a federal disaster area. The loss can be claimed by taxpayers on their 2010 tax return or their 2011 return. The ability to make a claim expires after April 17, 2012.
7. Don’t Overlook the Small Business Health Care Tax Credit – Small Businesses paying at least half of employee health insurance premiums may qualify for a tax credit of up to 35 percent of the premiums paid.
The IRS also reminds people to keep tax related receipts and records, they help make filing quicker and easier and accurately.