The end of 2010 is almost here. Now is the time to get your 2010 deductions. The 1,000 pound gorilla in the room are the Bush tax cuts expire next year. At the time of writing this post, we still don’t know what will happen to our taxes in 2011. Discussion of this topic has been passed until after Thanksgiving. Will the lamest of lame duck sessions of Congress let the tax cuts expire for all? Will they wait until 2011 to make changes in the tax laws and make them retroactive? What we should be focusing is what we can control and the known. We know the 2010 tax laws (at least no changes have been made for estate taxes..yet), so let’s work on what we can do this year.
- As mentioned previously, make sure all of your tax differed investments are filled for 2010.
- The federal government is offering a home improvement tax credit that ends this year. Like Warren Buffett I’m thanking Uncle Sam. We replaced our 17 year old air conditioning unit. With our local utility company rebate, we’ve saved a total of $2,100. W00t!
- If you are low income (which I assume isn’t most of my readers), you could qualify for a free government appliance.
- Sell any stocks that have considerable long term gains. For most investors, long term capital gain taxes will increase from 15% to 20% This is not 100% confirmed, but it more than likely will happen.
- If you have a flexible spending account (FSA), make sure you don’t have any money left. Once 2011 rolls, around any money left over is gone. This might be the time to buy any over-the-counter drugs, since you will not be able to do this in 2011.
- If you can control your income and any bonuses (mostly applies to small business owners), try to push forward any income into this year. This is atypical of what accountants typically recommend. They usually recommend pushing income into the next year. More than likely your tax rate will be going up in 2011.
Of course, with any of these suggestions I would suggest speaking to your accountant and/or tax adviser. Everyone’s situation is different.
Unfortunately for us small business owners and straight salary employees, we cannot do what Google did with their corporate taxes. By using a complex and not well known dutch sandwich tax, Google only paid 2.4% in federal taxes. Everything Google did was legal, but I’m not happy with this fact. This, though, proves my point that companies (and people for that matter) always do what’s in their best self interest. Even Google the “do no evil” company does everything legally possible to minimize their taxes. Regardless of the rhetoric some millionaires and billionaires state they want to pay more in taxes, I don’t see them “donating” an additional check to the IRS. There is a reason why Warren Buffet only takes home $100k in annual salary and has never sold a share of his company stock. He tries to minimizes his taxes just like everyone else, and I can assure you he doesn’t pay a dime more than he legally has to.
Looking forward into 2011, maybe you and your spouse might want to consider living on one income. This, of course, depends upon your income level, marital status, and if both spouses are working. Once the tax rates become known for 2011, I would run the calculations to see if it makes sense. The marriage penalty might come back for 2011. If this is true, there will be situations where if only one spouse works you would net more take home pay. As crazy as this sounds, I had one friend in which this applied to and the wife stopped working to take care of the child. They had the benefit of not paying for daycare and at the same time the mother was taking care of the child.
Readers: Do you have any tax tips you can recommend for 2010?
