There are many tax-saving steps that can be taken before the end of this year. Here is a list of the most important actions that should be taken no later than Dec. 31, 2009 to save taxes:
... Realize losses on stock while substantially preserving investment position.
... Convert investment income taxable at regular rates (e.g., interest income) into qualifying dividend income.
... Arrange with employer to defer bonus until 2010.
... Increase basis in partnership or S corporation to make possible a 2009 loss deduction.
... Use credit card to prepay expenses.
... Make energy saving improvements to your home that qualify for tax credits in 2009, or purchase a credit-eligible hybrid car or alternative fuel motor vehicle.
... Pay contested taxes to deduct them this year while continuing to contest them next year.
... Put equipment in service before year-end to qualify for the 50% bonus first-year depreciation allowance.
... Make expenditures qualifying for the $250,000 business property expensing option.
... Settle insurance or damage claim if this will maximize casualty loss deduction.
... Apply bunching strategy to “miscellaneous” itemized deductions, medical expenses and other itemized deductions to increase deductible amounts.
... Increase withholding to eliminate or reduce estimated tax penalty.
... Set up self-employed retirement plan.
... Make gifts taking advantage of the $13,000 gift tax exclusion.
... Watch out for marriage penalty in regard to year-end marriage or divorce plans.
... Consider deferring a debt cancellation event until 2010.
... Decide whether to elect to deduct investment interest against capital gains and/or qualified dividends.
... Avoid personal holding company tax by making dividend payments.
... Take steps to avoid or minimize income tax on Social Security benefits.
... Structure real estate deal to avoid paying interest on tax deferred under installment method.
... Step up level of participation in business activity to meet material participation standard under passive loss rules.
... Dispose of passive activity to free up suspended losses.
... Ask employer to increase withholding of state and local taxes to pull the deduction of those taxes into 2009.
... Extend subscriptions to professional journals, pay union or professional dues, enroll in (and pay tuition for) job-related courses, etc., to bunch into 2009 miscellaneous itemized deductions subject to the 2%-of-AGI floor.
Please give me a call to discuss any of these items that you feel are applicable to your particular situation.
Sincerely,
Perry P. Gambrell, Jr.
