Time is winding down, but if you are proactive instead of reactive, it’s not too late to take advantage of a few tax tips that can save you big bucks on your 2010 tax return! Any tax professional will tell you that the most beneficial tax preparation won’t take place in April; it begins in December. So, make 2011 less taxing on yourself by getting things together now.
1. Save money by prepaying tax-deductible bills. For example, if you paid your January mortgage in December, you could deduct the January interest payment this year. The same with a property tax bill. If a property tax bill is due in January or February of next year, as a homeowner you may also pay it this month and deduct it from your taxes for 2010.
2. Max out college and retirement contributions. If you have a 401k for yourself or a 529 college savings plan for the kids, make the largest additional deposit you can according to the legal limits and your own financial comfort. Remember though, it would pay to stretch yourself in this area. First of all, the money is not leaving your life; its going into the future to multiply on your behalf. And second, the government is going to give you additional credit for preparing for your own future as well as your childs! Being paid to save can be worth the sacrifice.
3. Collect December payments in January. If you’re self-employed and you already know you earned much more this year than last year, you may want to defer collecting any payment for December services until January. This way you will not pay taxes in 2010 on what you earned in December. If you are an employee and expecting a bonus, try and see if your employer will pay the bonus after December 31st.