Tax Moves to Make Now
Where did the (tax) year go? This past year really did fly by, and we are now days away from the end of regular tax filing season. With April 16th a holiday in Washington DC, the 2011 tax filing deadline is the 17th. This year you get an extra weekend to file taxes, so you’ve still got some time, but not too much! Let’s look at a few things you can do in these final days to help reduce your taxes owed this year.
Fund your 2011 IRA: There is a limit of $5000 or $6000 if you are 50 or older. If you are covered by a retirement plan at work, your deductible amount is limited based on your income. For singles, your contribution is phased out from an income of $56,000 to $66,000 and if your are married, $90,000 or less in modified adjusted gross income gets you a full deduction, and it’s slowly phased out until your MAGI reaches $110,000.
Decide how to handle that Roth conversion: In 2010 something remarkable happened regarding the rules concerning the Roth IRA. For conversions made in 2010 you could claim the full conversion in 2010 as usual, or you can split the income over two years, and add half the income to your 2011 tax return and half to 2012.
The HSA: If you had an HSA in 2011 you can make your final deposit by the tax return due date, up to $3,050 if you have self-only HDHP coverage and $6,150 if you have family HDHP coverage. Generally you can claim your contributions as an adjustment to income.
Charitable deductions: In general, when we donate to charity, it’s either by check or credit card for easy tracking. If you’ve donated items such as clothing, books, toys, or furniture to a qualified charity during the year, now’s the time to find that receipt. In fact, now is the time to grab a folder and write “taxes 2011″ and “charitable deductions.” Keep these receipts in order so you don’t miss any potential deductions. If you work for an employer who offers a payroll deduction for charity, often the employer does not send a year end confirmation, your final paystub should serve as proof of the donations during the year, this one is easy to miss.
The state sales tax deduction: You are able to take a deduction for sales tax instead of state income tax if that benefits you. For states with no income tax this is an easy decision. If you had a large purchase such as a car, you may find that sales tax paid over the course of the year was greater than your state income tax.
As we get near the filing deadline, I hope these tips help you uncover some tax savings you may otherwise have missed. Also remember that TurboTax will guide you through these entries.