Individuals
· Increase the amount you set aside for next year in your employer’s health flexible spending account if you set aside too little for this year. Don’t forget that you cannot set aside amounts to get tax-free reimbursements for over-the-counter drugs, such as aspirin and antacids.
· Realize losses on stock while substantially preserving your investment position.
· Increase your withholding if you are facing a penalty for underpayment of federal estimated tax. Doing so may reduce or eliminate the penalty.
· Make energy saving improvements to you main home, such as putting in extra insulation or installing energy saving windows or buying and installing an energy efficient furnace, and qualify for a 30% tax credit. The total credit for energy efficient improvements to the home is $1,500.
· Convert your traditional IRA into a Roth IRA if doing so is expected to produce better long-term tax results for you and your beneficiaries. Distributions from a Roth IRA can be tax-free but the conversion will increase your adjusted gross income for 2010. However, you will have the choice of when to pay the tax on the conversion. You can either (1) pay the tax on the conversion when you file your 2010 return in 2011 or (2) pay half the tax on the conversion when you file your 2011 return in 2012, and the other half when you file your 2012 return in 2013.
· Take required minimum distributions from your IRA or 401(k) plan if you have reached age 70 and ½ . Failure to take a required withdrawal can result in a penalty of 50% of the amount not withdrawn.
· Make annual exclusion gifts before year end to save gift tax. You can give $13,000 in 2010 or 2011 to an unlimited number of individuals free of gift tax.
Business
· Hire a worker who has been unemployed for at least 60 days before year end if you are thinking of adding to payroll soon. Your business will be exempt from paying the employer’s 6.2% share of the Social Security payroll tax on the formerly unemployed new-hire for the remainder of 2010. Plus, if you keep that new hire on the payroll for a continuous 52 weeks, your business will be eligible for a nonrefundable tax credit of up to $1,000 after the 52 week threshold is reached. This credit will be taken on the business’s 2011 tax return.
· Put new business equipment and machinery in service before year-end to qualify for 50% bonus first-year depreciation allowance.
· Set up a self-employed retirement plan if you are self-employed and haven’t done so yet.
· Make expenses qualifying for the $500,000 business property expensing option. The maximum amount you can expense for a tax year beginning in 2010 is $500,000 of the cost of qualifying property placed in service for that tax year. Also, with the overall $500,000 expensing limit, you can expense up to $250,000 of qualified real property (certain qualifying leasehold improvements , restaurant property, and retail improvements).
