Small Business Taxes & Management

Special Report


Year-End Planning For Individuals

 

Small Business Taxes & ManagementTM--Copyright 2010, A/N Group, Inc.

 

Introduction

It's about that time to do some serious year-end tax planning. We recently posted our Year-End Planning For Businesses article. If you have your own business please read both sections before taking any action.

Don't underestimate the importance of year-end planning. You can save big tax dollars by deferring or shifting income from one year to another. Next year is too late; even the end of December may be too late for some techniques.

By now everyone knows that the Bush tax cuts are due to expire at the end of this year. If you read our News of the Day section regularly you also know that President Obama has reached a broad agreement with Republicans on extending the cuts. While the details are very much up in the air, and Democrats are not happy, it looks like tax rates will remain the same in 2011 and most of the other benefits such as the lower tax rates on dividends and capital gains will remain in effect. We'll update you regularly as the details emerge.

A number of other provisions associated with the Bush cuts are also expiring at the end of 2010. They include:

These should be extended. The additional standard deduction for state and local real property taxes, is not mentioned in the bill.

Caution--Before taking any tax action, evaluate all the factors surrounding the decision. Don't risk an economic loss for a small tax saving. Even if you're in the highest bracket (figure federal and state), a $1 tax deduction won't save more than about 40 cents in taxes. That means a $100 expenditure will cost you $60 out of pocket; more if you're in a lower bracket.

 

Getting Started

Estimating your income. This is the first step. You can't take action if you don't know where you stand now. Assemble your records for the first 10 or 11 months of the year. If you record income and expenses on a regular basis, this should be a snap. If not, doing it now is vital for tax planning and will make tax filing easier next spring.

Estimating your expenses and deductions. You've also got to come up with an estimate of your deductions. The items below are common deductible expenses.

Finding your tax bracket. If you've got a good handle on your income and expenses you can net the two to arrive at your taxable income. Be sure to also subtract out personal exemptions (use $3,650 each for yourself and spouse and dependent children). If your AGI exceeds certain thresholds your personal exemption and itemized deductions may be limited.

If you're pretty confident of your computations, you can find your tax bracket by using the Tax Tables in our Reference File. Keep in mind that long-term capital gains and qualifying dividends are taxed at a lower rate. Go to our Tax Tables for the details.

Also consider your filing status this year and next. If you're going to get married or divorced next year, that can drastically affect your tax bracket. How much can depend on your new (or old) spouse's income. For example, you're a salesman making $175,000 annually. Your new wife is an artist yet to be recognized. You'll save a substantial amount over last year. On the other hand, the closer your incomes are, the less the savings. Whether you're married or single this year depends on your status as of December 31. (If you'll be single with a dependent child you'll be able to file for head of household status.)

If things look too complicated, and you don't want to talk to your tax adviser, get a computer program. Final or planning versions of popular programs should be available soon. In a pinch you can use last year's program. The final tax amounts will be off, but not significantly, and may be good enough for planning purposes.

 

Taking Action

Tax rate differences. This is a basic tax-planning strategy. If you're in a high bracket this year but expect to be in a lower one in 2011, you want to defer income to next year (or accelerate deductions to this year). CAUTION. Be careful not to overdo it. You could end up pushing yourself into a higher bracket next year. Conversely, if you expect to be in a higher bracket next year, you may want to accelerate income into 2010 and delay deductions. Again, don't overdo it.

Another point. Many benefits are phased out for taxpayers above certain AGI thresholds. For example, if both you and your spouse are covered by a pension plan, you can't make deductible contributions to an IRA if your modified AGI exceeds $109,000. (Phaseout begins at $89,000.) Because there are a number of these phaseouts, and they occur at various AGI amounts, you can't plan for all of them. However, you should be especially careful as your income approaches $100,000. And one phaseout can be critical. For married taxpayers filing jointly, the American Opportunity Credit (a replacement for the Hope credit for 2009 and 2010) is phased out for AGI levels over $160,000 ($80,000 for single taxpayers). If you have two children in college and they would both qualify for the credit of $2,500 each, you could lose $5,000. And that's a tax credit, not simply a deduction. You may want to defer income from this year into next, (or accelerate income into this year if they'll be starting school next year) to maximize use of the credit.

Example--For 2010 you're in the 25% bracket. Because you expect to close a big deal in 2011 you anticipate being in the 33% bracket, but you project falling back to the 25% bracket in 2012. Accelerating income into 2010 might make sense. Use caution. You can overdo it.

How big can the savings be? The difference between 33% and 25% is 8%. If you can shift $10,000 from the high tax year to the low one, the saving is $800. Shift $25,000 and the saving would be $2,000. And that's a permanent tax saving. Business owners might be able to save more. If the rate differential is 20%, (e.g., from the 35% bracket to the 15% one) shifting $25,000 of income can result in a tax saving of $5,000.

Deferring income. How do you defer income? (The discussion here doesn't include business income on a Schedule C. See our Year-End Planning For Businesses.) There aren't too many options on your individual return, especially this late in the year. And keep in mind that you can't avoid income by simply not cashing the check.

Caution. If your business lost money in 2010 or a prior year or you expect a big loss in 2011, you may have a net operating loss (NOL) which you may be able to carry back to an earlier year. There are a number of options, making rules of thumb tough. Best approach is to talk to your tax adviser.

Accelerating deductions. In addition to deferring income, one way to lower your taxable income in 2010 is to accelerate deductions. Here are some options.

Caution--Some items are not deductible for alternative minimum tax (AMT) purposes. They include taxes, certain interest on a home mortgage, and miscellaneous itemized deductions. In addition, only medical expenses that exceed 10% of your AGI are deductible. So taking big deductions for taxes could trigger an alternative minimum tax problem. See below for a more detailed discussion of the AMT.

How to pay. If you're a cash-basis taxpayer (almost all individuals are), you can deduct payments made by December 31. There's no problem with cash (get a receipt). Checks must be in the mail by December 31. Do it a few days earlier to avoid having to prove the mailing date. Credit card payments are considered made when you sign the authorization slip, even if you don't pay off the card for some time. IOUs or notes don't count until they're actually paid.

Accelerate income--defer deductions. What if you think you'll be in a higher bracket next year? For example, you know you'll be closing on a big deal, or you're selling a business and you'll have a lot of ordinary income on the sale. Another twist involves the alternative minimum tax (AMT). If you're going to be hit with it no matter what you do, accelerate income into 2010. The AMT tax rates are 26% and 28%. This requires careful planning; too much income and you'll be paying the higher regular tax. Some techniques are just the reverse of what we've discussed above. Here are some other thoughts.

How do you collect on the installment notes? The most straightforward way is to ask the buyer to pay the balance of the note (or a part of the balance) before the end of the year. If that doesn't work, you might be able to sell the note to a third party. Unless the interest rate is attractive, you may have to take a discount. Factor that into your analysis. Finally, if you pledge the note as collateral for a loan, the note will be deemed to be paid.

Caution--A significant portion or even all of the gain may be capital in nature. Capital gains will be taxed at no more than 15% (possibly not taxed at all if you're in the 10% or 15% bracket). Keep that in mind when doing your analysis.

Delaying deductions may be fairly easy to do. Just don't pay the bills. If real estate taxes are due late in the year you might delay payment to next year. That last installment of estimated state taxes can be paid in early 2011. Take into account any late payment penalty. It's best not to delay paying your home mortgage. You don't want to hurt your credit rating. Charitable contributions can be put off till next year.

You might also delay some medical expenses such as a routine physical, payment of medical insurance, etc. However, if you might make the 7.5% threshold this year, but not next, it makes sense to take the deduction this year. A deduction at 15% is still worth more than no deduction at all.

Before taking action also consider any potential changes in your life that could affect your taxes. A divorce, marriage, or death can significantly affect your tax bracket. So can the loss of exemptions, e.g., children leaving the nest--or a new addition. Retirement, loss of a job, an inheritance (IRAs, pensions, etc. left to you can be taxable) all can affect your bracket and taxes.

Generating cash. If you need cash for your business, a new home, college tuition, etc. planning ahead can save you taxes. Some of the techniques above will generate cash, but at a price.

If you're thinking about any of the above strategies, you need to talk to your tax advisor. The tax rules can be tricky and the consequences substantial.

Alternative minimum tax. The idea behind this tax (AMT) is to make sure even taxpayers with big deductions pay at least a minimum amount of tax. At least that was the theory when the law was written in 1969. The tax rate is 26% on the first $175,000 of alternative minimum taxable income (AMTI), and 28% on amounts above that level. While the rate sounds attractive, your AMTI is sure to be higher than your regular taxable income. That's because you can't deduct taxes, some home mortgage interest and miscellaneous itemized deductions. Your deduction for investment interest may be limited and your deduction for medical expenses is only the amount that exceeds 10% (not 7.5%) of your AGI. Income from certain municipal bonds that's tax-exempt for regular income tax purposes may be taxable for AMT purposes. Finally, there are only two AMT rates vs. the six rates for regular tax purposes.

In addition, you may have to increase your AMTI for excess depreciation from rental properties, S corporations, partnerships, or a Schedule C (sole proprietorship). Other adjustments include income from the exercise of incentive stock options, any difference between regular taxable income and AMTI from certain passive activities, and adjustments for depletion and intangible drilling costs. While there are some other adjustments, you're unlikely to encounter them.

Most of these adjustments will increase your AMTI. You're allowed an exemption ($70,950, married filing joint; $46,700 single in 2009; Congress has yet to act on the amount for 2010), but it's phased out if your income exceeds $150,000 (married, joint) or $112,500 (single). Finally, if you pay the AMT as a result of a timing adjustment (e.g., depreciation), you may be entitled to a credit on next year's tax.

Sounds complicated? It is. It's pretty tough to plan for this tax without going carefully through the math or using a computer program. There's a lot of interaction. Here are some thoughts:

You can get some help at the IRS Web site at Alternative Minimum Tax Assistant for Individuals. As of this writing the 2010 version isn't on the site, but the 2009 version may give you an idea of where you stand.

 

Investment Strategies

The is one of the best areas for tax planning. And, you've generally got till nearly the end of the year to act. There are plenty of good ideas in the discussion below. Just keep in mind that investment objectives should take precedence over tax saving motives.

Assess your positions. The first step is to find out where you stand. That is, list all your positions (stocks, bonds, and any other investments that you might consider selling). Include the date purchased, the purchase price, adjustments (reinvestment of dividends increase your basis, stock dividends and splits affect your basis, etc.), your adjusted cost basis, and the current market value. Then you can determine whether you have a gain or loss and how much. Here's a summary of the rates:

Note. If you sold property on an installment basis, the tax rate is based on when the money is received, not when the sale was made. That is, you'll get the benefit of the current rates on property you sold on the installment basis some years ago. Or suffer the higher rates if capital gain rates increase.

Important. If you're in the 10% or 15% bracket in 2010, your long-term capital gains will not be taxed. Caution. Once your taxable income, including any gains, exceeds the 15% bracket any additional gains will be taxed at the 15% long-term capital gain rate. If you know you'll be in a low bracket next year, deferring gains might make sense. As always, investment considerations are paramount.

Check your mutual fund or brokerage statement carefully. Some gain may be taxed at 25% (the unrecaptured depreciation) if you invested in a REIT (real estate investment trust) or you or your S corporation or partnership sold real estate.

Within each rate group, gains and losses are netted to arrive at a net gain or loss. The following additional netting and ordering rules apply. Short-term capital losses (including short-term capital loss carryovers) are applied first to reduce short-term capital gains, if any, otherwise taxable at ordinary income rates. A net short-term loss is then applied to reduce any net long-term gains from the 28% group, then to reduce gain in the 25% group, and finally to reduce net gain from sales taxed at 15% (or 0%).

For long-term gains and losses, a net loss from the 28% group (including long-term capital loss carryovers) is used first to reduce gain from the 25% group, then to reduce gain from the 15% group. A net loss from the 15% group is used first to reduce net gain from the 28% group, then to reduce gain from the 25% group. Any resulting net capital gain that's attributable to a particular rate group is taxed at that group's marginal tax rate.

Fortunately, you're likely to only have to worry about short-term gains and losses (ordinary income treatment) and long-term ones (15% and 0% rate categories), not those in the 28% and 25% group. That will make planning easier.

Careful timing of your capital gains could produce some permanent tax savings. For example, you've got some stock with potentially (you haven't sold it yet) $3,000 of long-term (15%) gains. You've already sold stock that generated $3,000 in short-term losses. You don't think you can generate any short-term profits to offset the loss. It might make sense to hold off on taking the long-term gain. You can use the $3,000 loss to offset ordinary income this year. Then take the long-term gain next year and pay taxes at only 15%. In other words, you're taking a deduction at, say 35%, and paying taxes at 15%.

Unfortunately, the market may not cooperate. You don't want to risk holding onto a stock that could decline in price, just to save some tax dollars. On the other hand, if you're selling real estate, it may be easy to postpone the sale into the following year. If you sell or sold property using an installment sale, you may also have some options in recognizing the income. Minimizing your tax bite isn't as easy as before. You'll have to work through the numbers. If the gains are substantial, consult your financial or tax adviser.

You may have very few gains. But no matter what you do, investment considerations should come first. No tax deduction or gain avoidance technique will offset a poor investment decision. And keep in mind that capital losses can be carried forward indefinitely, capital gains not used to offset losses can't be carried forward; they're taxable immediately.

Even if you can't play the rate game described above, some approaches still work:

Sell capital gain property. If you've already realized some losses during the year, you might want to take enough in capital gains to offset the losses. If unused, the losses can be carried forward indefinitely and used to offset gains or up to $3,000 in ordinary income in any one year. That may be small comfort if you've got a substantial loss carryforward. ($100,000 in losses at $3,000 a year will take over 33 years to use.) Analyze your positions to decide if you'll continue to have substantial gains in the future. If not, consider selling stock at a gain now to use the loss.

Generate losses to offset gains. If you've realized gains during the year, consider selling positions where you have a loss, but only after assessing the investment's potential. Don't forget that any mutual fund holdings (other than those in an IRA, Keogh, etc.) will probably generate some long-term capital gains through distributions before the end of the year.

Converting short-term into long-term gains. Gains on property held more than 12 months are taxed at no more than 15% now; stock or other investments held 12 months or less produce short-term gains taxed at ordinary income rates, up to 35%.

If you're near the critical 12-month mark, you might want to consider holding on for just a little longer to take advantage of the lower rates. You've got to balance that against the chance that the price could fall. Generally, the closer you are to the 12-month threshold, the more you should consider holding out. The extra return could be substantial. For a formula to see how much you can lose and still break even by waiting, use the formula Breakeven Holding Period for Long-Term Capital Gains on our Formulas page.

Selling different lots. If you purchased shares at different times you can specify (do it in writing) to your broker which lot to sell. If you don't, the IRS assumes a FIFO (first-in, first-out rule applies). Selling the right lots can save considerable tax dollars.

Example--You bought 100 shares of Madison in 1990 for $4,000 and 100 shares in 1995 for $21,000. Madison's now trading at $100 a share so 100 shares are worth $10,000. You want to sell only 100 shares. If you tell your broker to sell the 1995 shares you'll have an $11,000 loss. If you don't specify which lot to sell, the shares bought for $4,000 in 1990 are the ones assumed sold and you'll have a reportable gain of $6,000.

In the example above you could sell half your investment, take a loss, and still have a position in Madison, should a move to higher ground seem possible. The same rules apply to determine the length of the holding period. Sell one lot and you might have a short-term gain (or loss); sell a lot you held longer and you could have a long-term gain (or loss).

Another point. Even if both positions showed a gain, selling the one with the higher cost basis could reduce your position with the minimum amount of tax liability and end up generating more after-tax cash. Of course, if you've got substantial losses with scant hope of using them in the near future, selling the low-cost basis shares may make more sense.

Getting on in years? If you're older or in poor health, you should discuss your options with your tax adviser. The gain built into low-cost-basis shares might escape tax entirely because your heirs will receive a stepped-up basis in the shares. For example, you purchased 100 shares of Madison Software Inc. in the 80's for $1,000--it's now worth $100,000. If you hold the stock on your death your heirs could sell it the next day for $100,000 and pay no capital gains tax. But there are other issues to consider when planning for transferring property on death. And the stepped-up basis rules may not be fully in effect.

Caution--The rules are more complicated when it comes to mutual funds. There are several methods of computing cost basis. That topic is beyond the scope of this article. Mutual fund companies now provide cost basis information on year-end statements or will give you that information if requested by phone. But that's only one of your options. And it may not be the best one.

Take the loss, regardless. If there's no chance of a comeback for the investment, consider taking at least some of the loss, even if you have no offsetting gains. Up to $3,000 of losses can be used against ordinary income. Additional losses can be carried forward to use against future gains or up to $3,000 a year can offset ordinary income. On the other hand, gains are fully taxable in the year of sale.

Collect bad debts. You cannot take a bad debt deduction for nonbusiness bad debts unless the debt is totally worthless. We can't go into details here, but most debts held by individuals are considered nonbusiness. You must be able to show you tried to collect the debt, but were unable to. This could take some time. Don't wait till the last minute.

Worthless stock. You can't just claim the stock is worthless. You have to be able to prove it. Even if the stock isn't quoted and the company is in bankruptcy, the IRS will claim it could recover. Sell the stock through your broker. If you can't, sell it to a colleague (not a relative; and get documentation).

Installment sale. An installment sale can spread a gain over several years. That may keep you out of a higher tax bracket and/or allow you to defer the gain to years when you might be in a lower bracket. In addition, that capital gain may be useful in later years to offset any capital losses. All that's necessary is that at least one payment is received in the next tax year. Should tax rates drop or for any other reason you can use the gain at little tax cost in a future year, there are ways to recognize the gain immediately. Talk to your tax adviser. Capital gain rates could go up in the future.

Three cautions. You can't use the installment method for publicly traded stock and you've got be careful if you're selling tangible property. In the latter situation, any depreciation recapture is fully taxable in the year of the sale. It can't be deferred. Finally, you can't use the installment method if you're a dealer in that property. For example, you can sell a machine tool used in your business on the installment basis. On the other hand, if you're a dealer that sells such tools, you can't use the installment method.

Charitable contribution of appreciated stock. This is an old technique, but it works so well it's always worth mentioning. If you make a charitable contribution of stock (you've held more than 12 months) that's appreciated in value you get to deduct the full fair market value as a charitable contribution. That's better than selling the stock and contributing the cash since you avoid paying capital gains tax and you also avoid increasing your adjusted gross income by the amount of the gain. The latter is important since many exemptions (e.g., the $25,000 rental real estate exemption) and thresholds are based on your AGI. Caution. There are some special rules. The most important is that your deduction is limited to 30% of your AGI. Any excess can be carried forward, but only for 5 years. So don't overdo it. Consider a charitable lead or remainder trust.

Bond swaps. The idea is to sell bonds where you've got an unrealized loss, take the money and invest in bonds or other securities with a higher yield. This approach generally only makes sense if you can use the loss to offset other gains. The tax savings can be added back to the proceeds of the bond sale to provide additional capital.

Wash sales. You may have a loss in a position and want to take the loss this year, but like the stock and want to hold on. If you sell the stock (or bond) and purchase the identical security within 30 days before or after, the loss will be disallowed. For example, you sell 100 shares of Madison Inc. at a loss on November 28, 2010. If you bought 100 shares of Madison Inc. within the 30-day window, say on November 10, 2010 or December 20, 2010, the loss would not be allowed for tax purposes. It's not lost. Your basis is adjusted and you get the benefit when the new stock is sold.

The easiest way out of this situation is to wait 31 days before repurchasing the same securities. The second approach is to buy stock of another company in the same industry that is expected to perform similarly. Later you can buy back into your original holding. And one emerging growth mutual fund is not the same as another emerging growth mutual fund. CAUTION. A S&P 500 Index fund run by Madison Investments is the same as a S&P 500 Index fund run by Chatham Fidelity. Index funds can be identical.

Selling short against the box. In the past this technique could be used to effectively sell the stock (you got the cash and locked in the gain), without paying the tax. Moreover, you could defer the tax virtually indefinitely. That won't work any more. You can use the approach to postpone a gain for 30 days into the following year. However, after you close the position you'll have to hold the stock for 60 days. That can expose you to substantial risk. Talk to your broker or financial adviser before considering this approach.

Passive activities. Do you own an interest in a partnership or S corporation that is a passive activity in your hands? The general rule is that passive losses can only be used to offset passive income, or deducted in full when the passive activity is disposed of completely.

You've got several options. The first is to do nothing. Any unused losses can be carried forward. That may be small comfort since the losses are worth less and less each year because of the time value of money.

You might try selling the investment. There is a market for some old tax shelter partnerships. That may be a smart move if it's unlikely the prospects for the investment will improve. Make sure you understand the basis rules when calculating your gain or loss. Those prior year losses reduced your basis. You could have a gain, or much less of a loss.

Investment interest. As an individual, your interest deduction is generally limited to interest on a home mortgage, a home equity loan, and investment interest. Investment interest is interest incurred to buy investment property--usually stocks, bonds, etc. (But not tax-exempt bonds. You can't deduct any interest associated with them.) The rule is that any investment interest is limited to your investment income for the year. Any excess can be carried forward. Investment income includes interest, nonqualifying dividends (dividends that don't qualify for the lower, capital gain tax rate), short-term gains, and, if a special election is made, long-term capital gains and qualifying dividends.

Example--You had $2,000 of margin interest during 2010. You had $1,200 of interest income from bank accounts and $200 of short-term gains and $100 of nonqualifying dividend income from REITs. That's a total of $1,500 of investment income. You can deduct $1,500 of the margin interest. The unused $500 of interest expense can be carried forward and deducted next year, if you have sufficient investment income.

It may be too late in the year to generate interest or dividend income, but you could create some net short-term capital gains by selling stock or bonds at a profit. Remember, investment considerations come first. Long-term capital gains and qualifying dividends can also be considered investment income, but only if you make an election to have them taxed at ordinary income rates. In some cases this election works, but you've got to run the numbers.

Investment interest doesn't have to come from a margin account, but you must be able to show the interest expense applies to the investments.

If you're a small business owner that operates through a regular corporation you may find yourself concerned about this trap if you borrowed money to purchase stock in the corporation, advanced equity capital, or loaned it additional funds.

Example--You borrowed $150,000 to purchase stock in Madison Inc. a regular corporation in which you have a 50% interest. You borrowed another $50,000 which you loaned to the corporation at 6%. During the year the corporation paid you $3,000 of interest on the loan. You paid interest of $18,000 on the $200,000 you borrowed. You have no other interest, dividend, or capital gain income. Since you only have $3,000 of investment income (the interest the corporation paid you) you can only deduct $3,000 of the interest. The remaining $15,000 can be carried forward.

Often the situation described in the example above won't reverse for several years. If the interest rate on the loan to the corporation were higher, you'd be able to deduct more of your investment interest. In some situations it might even make sense to pay a taxable dividend. There's no general rule here. Work through the numbers with your tax advisor.

S corporations, partnerships, LLCs etc. generally don't have this problem. Any such interest expense is deductible on Schedule E.

 

Other Strategies

Here's a list of other tax saving strategies.

 

Other Considerations

Deductible IRA rules. For 2010 you can make the maximum deductible IRA contribution even if both you and your spouse are covered by pension plans if your AGI is $89,000 (phaseout over this amount) or less. Single individuals can deduct the maximum if their AGI is $55,000 or less. Married with spouse covered by plan, you're not? The AGI threshold is $166,000.

You can still convert a regular IRA to a Roth. But remember, the conversion will be taxable. Conversion makes sense if you're in a low bracket this year (e.g., your S corporation or partnership had a bad year). For 2010 there is no AGI limit. You can also spread the income over two years. There are many tax implications. Talk to your advisor.

Collected unemployment? In 2010 all the benefits are taxable.

Education credits. The Hope Scholarship Credit has been expanded and renamed the American Opportunity Tax Credit. The credit applies to the first four years of a student's college education and is equal to 100% of the first $2,000 of qualified tuition and 25% of the next $2,000 for a maximum of $2,500. Phaseout begins at $80,000 for a single individual and $160,000 for a married couple filing joint. The credit can be claimed on tuition, fees, and course materials (e.g., books). The credit is available only in 2010 for amounts paid in 2010 for academic instruction in this year. Unless extended, the Hope Scholarship Credit is available next year, but limited to $1,000 for the first year and $500 the second year (subject to phaseouts). After that, the Lifetime Learning Credit becomes effective.

Credits. If you've got a child under age 17 you may be entitled to a $1,000 credit. There isn't much planning involved here.

Energy-saving tax benefits. Last chance. The credit expires December 31 and extension is not a priority. The credit percentage for building envelope components (windows, doors) is now 30% and the maximum credit is $1,500. The same percentage applies to furnaces, furnace fans, central air conditioners, and water heaters. Check to make sure the item is certified as complying. There's no phaseout or other restriction, and, since it's a credit it doesn't depend on your tax rate.

Alternative energy credit. The credit caps for solar hot water, wind, and geothermal property have been eliminated. The credit is 30% and applies only to principal residence. The credits won't expire for a number of years, so you have time.

FSA (Flexible Spending Account). The end of the year may be your last chance to deplete your FSA. While some taxpayers will have another 2-1/2 months; that's only if your employer changed his rules. And remember, the rules are changing. You won't be able to deduct nonprescription drugs, etc. in the future

401(k) election. Now is also the time to make your 401(k) election for next year.

 


Copyright 2009-2010 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject.--ISSN 1089-1536


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--Last Update 12/09/10