End of Year Tax Tips

Although there are only ten days left in the year, there are still some things you can do to save big on your 2009 taxes:

Compare Standard vs. Itemized Deductions – Put the amount of your standard deduction next to your itemized deduction. If your itemized deductions are slightly lower than your standard deduction and you won’t be able to itemize next year, try shifting some of next year’s payments to this year. For example, pay your 2010 real estate taxes in 2009. If you can’t itemize in 2009 but may be able to in 2010, postpone expenses. Pay your 2009 property taxes and make your charitable donations in January rather than at the end of the year...then you can "double up" next year.

Medical Deductions – These expenses are deductible if they exceed 7.5% of your adjusted gross income. If you think you may be close to this threshold, consider getting any necessary procedures done before the end of the year. You can save losing expenses to the 7.5% floor twice and make more of them deductible.

Retirement Contributions – You can lower taxable income by contributing to a retirement plan. You can make contributions to 401(k) and 403(b) plans up to December 31, 2009. Contributions to IRAs can be made as late as April 15, 2010.

Charitable Donations – If you plan on itemizing this year, donating to charities is a good way to increase your deduction. Donations can include cash, clothes, household items, toys, and even contributions made by credit card. Remember, if the value of the donations is over $500, you must have an itemized list.

Miscellaneous Itemized Deductions – Employee business expenses, investment expenses, and tax preparation fees are miscellaneous deductions subject to a floor of 2% of your adjusted gross income. If the sum of these is close to or more than 2% of your AGI, consider whether there are other items in this category that you could purchase before year end. If they’re not close, postpone the purchase until 2010.

Cash Gifts – Up to $13,000 per person can be given away without having to file a gift tax return. If you’re married, you and your spouse can give $26,000 tax-free to an individual. The number of individuals you can give this to is unlimited. Keep in mind, however, that the individual needs to cash or deposit the amount prior to year-end. These types of gifts can reduce a taxable estate and potential estate tax upon the death of the giver.

Self-employment Tips – If you use the cash method of accounting, you can decrease your 2009 taxable income by postponing your December billings or collection efforts until January. You can also purchase supplies and equipment at year-end to accelerate your deductions.

Happy Holidays and Happy Tax Planning!

--LeAnn Carlson is the Audit Manager for Cook & Associates, a full-service public accounting firm with offices in San Marcos and San Antonio, TX