Top 5 tax moves you can make now to save moneyPosted: Updated:
The clock is ticking on 2010, and so are the tax breaks that could save you a lot of money.
Tax expert Deirdre Morhet is with BASC Expertise:
“First thing that should come to mind, especially this time a year, I always tell people is giving,” she said.
Stepping up your contributions to charities before the end of the year can land you some serious tax savings.
But, keep an inventory of the items you donate and be sure to hang on to your receipts.
The second year-end tax tip: Get rid of losing investments.
Cashing in negative stocks will help you reduce, and in some cases, erase your tax bill altogether.
“It's good to fish through your portfolio and look for those losing things and realize those losses now because those offset those gains, and you can actually offset as much as $3,000 each year,” she said.
Third: Maximize contributions to your 401K.
Individuals can contribute up to $16,500 this year.
People over 50 years old can contribute up to $22,000.
“There is definitely a lot of value there if you still have room to contribute to 401K, there's definitely a good way to push off some tax deferred savings,” Morhet said.
The fourth tax move to make before the year's end: Convert to a Roth IRS, which is generally a tax-free retirement plan.
Money transferred from a traditional IRS to a Roth is always taxed, but if you make the move before the end of the year:
“You can spread that tax out over 2011 and 2012 rather than having to pay the whole lump sum,” Morhet said.
But remember: This option ends January 1.
The fifth year-end tax tip: Gifting.
Uncle Sam allows you to give anyone up to a $13,000 tax-free gift each year.
Give to your children and grandchildren and you can significantly reduce your estate taxes down the road.
“Because the money it could save you could be quite a bit, quite significant,” Morhet said.
But before you make any major changes, talk to a tax professional, and remember, tax advice is a write off.
Another tip: Make your home more energy efficient. This is the last month to qualify for a tax credit up to $500 so be sure to get your paperwork filled out by December 31.