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End of Year Tax Tips

10 days remain in 2010. It’s not too late to make a few moves to help your tax situation for this year and next.

  • If you are 70-1/2 and taking RMDs (required minimum distributions) from your IRA, the just-passed tax bill allows you to donate directly to charity. If you don’t itemize, this is a way of turning that donation into an effective tax deduction.
  • If you are already retired, try to forecast your taxable income for the year and convert just enough IRA money to a Roth to “top off” your present bracket.
  • Check out Fairmark and see where you’re aiming to land tax-bracket-wise. If there’s a bit of room before hitting the next bracket consider a partial Roth conversion. e.g. you’re single with a taxable income of $28K. (This is after exemption, standard or itemized deductions, etc) Since the 15% bracket goes up to $34K, you can convert $6K and still be in the 15% bracket. If you overshoot, just recharacterize.
  • If you have an FSA (flexible spending account) and have any balance remaining, there are some easy ways to spend on items you can submit for reimbursement. Visit the eye doctor, and get new glasses. Review the list of reimbursable drugstore items and stock up. Band-aids, Ace Bandages, aspirin, cold medicine, birth control, there are quite a few things you can buy that are covered by FSAs. Don’t lose the chance to get your money back.
  • This is a good time to look at how much you are depositing to your 401(k) or other retirement accounts. Time to bump it up a bit.
  • Year end is also a good time to review your account beneficiaries. Have you had any change in family status? Marriage, divorce, new child, family member pass away? Check the beneficiaries on your IRAs, 401(k), insurance, and any other financial accounts. Many a wife has lost her husband’s 401(k) account or IRA to a former wife who was left as the primary beneficiary. Ouch.
  • Last, don’t forget, if you sell stock at a loss, up to $3K per year can be used to offset ordinary income, if you are over this figure, the excess carries to the next year.

Let’s put these final ten days of ’10 to good use. For more tips, check out Neal Frankle’s Financial Tax Planning Tips To Save You Money.

Joe

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