End of the Year Tax Tips

As we begin to round the corner and head into the holiday season, there is no better time to take a look at year end tax strategies~ before life gets too crazy. I don’t know about you, but around here the months of November-December all blend together in one big blurry mess!

Here are some tax saving tips to consider implementing before the end of the year to keep your income taxes as low as possible:

Review New Tax Credits and Deductions
There are some new tax credits and deductions available for 2009. People who purchased a new car or truck can write off sales tax even if they don’t itemize as part of the new vehicle sales tax deduction. Home buyers should review if they are eligible for the $8,000 tax credit for first-time home buyers. Homeowners should also review whether it would be advantageous to take the additional standard deduction for property tax in lieu of itemizing.

Boost Tax Deductible Expenses
Make an extra mortgage payment. The extra interest you pay will be added to this year’s mortgage interest by your lender, boosting your itemized deductions.

Pay Your Property Taxes
Real estate taxes are tax deductible. If your property tax bill is due early next year, consider paying it it now and take the deduction. If you paid last year’s proeprty tax bill in 2009, and you pay this year’s tax bill before the end of the year, you will get 2 years worth of property tax deductions on your 2009 tax return!

Donate to Charity
It pays to be charitable, especially at the end of the year. Donating cash is always a good idea. You can also donate household goods, clothing, and other items. Under the Pension Protection Act, you will need a written receipt for all charitable donations, and donated items must be in good or better condition. You can also deduct the cost of driving for charity at 14 cents per mile. You cannot take a charity deduction, however, for the value of your time or services when volunteering. Remember, always obtain a receipt from the charitable organization to substantiate your gift giving, whether you give cash or items

Pay Doctor Bills
You can take a deduction for medical expenses exceeding 7.5% of your adjusted gross income. Remember, medical expenses include insurance premiums, co-pays, prescription medications, prescription eye-glasses, contact lenses/cleaning solutions and dental expenses.

Boost Business Expenses
Business owners and independent contractors can buy office supplies, invest in new equipment, or pay bonuses to their employees. They should also review their retirement plans or decide about setting up a retirement plan. Many retirement plans need to be established by the end of the year if owners want to make tax-deductible contributions for the year. You will want to review what constitutes a legitimate business expense just to make sure it will be tax-deductible. Call or email us with any questions.

Max Out Your Retirement Savings
Contributions to a qualified retirement plan can reduce your taxable income.

Make The Most of Your Flexible Spending Account
You should use up any funds in your Flexible Spending Accounts, or risk losing that money forever. Use your FSA funds to buy eyeglasses, medications, or get a checkup.

Organize Your Financial Records
Good record-keeping can really pay off at tax time. Not only will it make your tax preparation easier and faster, but you might uncover enough tax deductions to be able to itemize. More importantly, the IRS will require receipts and other records in the event of an audit. Entrepreneurs and sub-contractors should be using accounting software such as Peachtree, QuickBooks, or Microsoft Office Accounting to ensure that all their income and expenses are recorded properly. Individual taxpayers may want to use Microsoft Money or Intuit’s Quicken to keep track of their personal spending. As an added bonus, these programs provide reports that summarize your tax deductions for faster tax preparation. I can’t stress this point enough: KEEP GOOD RECORDS!

Please feel free to contact E-File Florida at 954-583-8534 or visit us on the internet at www.efileflorida.com for more great tax tips and articles.

IRS CIRCULAR 230 Required Notice – IRS regulations require that we inform you as follows: Any Federal tax advice contained in this communication (including any attachments) is not intended to be used and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction as tax related matter(s).