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Year-End Tax Planning — It Isn’t Too Late

December 13, 2011

If you haven’t started your year-end tax planning, it isn’t too late especially since there is little prospect to the change in the tax code until after the 2012 election.  Forbes magazine published an article in the December 19, 2011 edition that has does a good job of laying out what to expect in the next year and several tips on year-end tax planning.  We would also like to offer a few things to think about:

You Can Contribute to Your IRA Plan After Year End

The window to make 2011 contributions to your employer plan closes at the end of the year but you can generally make 2011 contributions to your IRA up to April 17, 2012.

 Consider Paying Deductible Expenses in 2011

If you itemize deductions, it might help your 2011 bottom line to pay deductible expenses like medical costs, qualifying interest, and state and local taxes before the end of the year instead of waiting until 2012.

Depreciation and Expense Limits Drop

If you’re a small business owner or a self-employed individual, you’re allowed a first-year depreciation deduction of 100% of the cost of qualifying property acquired and placed in service during 2011.  This “bonus” first-year additional depreciation deduction will drop to 50% for property acquired and placed in service during 2012.

Deduction For Energy-Efficient Home Improvements Ends

This is the last year you’ll be able to claim a credit for energy-efficient improvements for your home. Specific credit amounts may also be available for the purchase of energy-efficient furnaces and hot water boilers. There is a lifetime credit cap so this may not be available.

Get Professional Assistance

Making effective year-end moves requires a solid understanding of the rules that are in effect for both 2011 and 2012. It also requires a comprehensive grasp of your overall financial situation. A financial professional can help you evaluate potential opportunities, and can keep you apprised of any last-minute legislative changes.

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