Make moves now to lower next year's tax bill
The past few years have been fraught with so much uncertainty about income tax rates, estate taxes and expiring deductions that planning wasn't easy. A year ago, for instance, Congress waited so long to act on expiring tax breaks that the IRS couldn't update all its systems in time for the start of the tax season. Millions of taxpayers had to wait until February to get their returns processed.
"It was a tumultuous year, as many of them seem to be," says Mark Steber, chief tax officer with Jackson Hewitt Tax Service.
But — cross your fingers — there isn't any legislation on the horizon that's expected to gum up tax strategizing this year.
Even so, you can't assume your return will be similar to the last one you filed, Steber says, especially if you underwent a major life change. You should review deductions and credits to see if you might qualify for them now even if you didn't before.
For example, if you lost your job or found a new one paying much less, Steber says, your income might be low enough that you're eligible for certain deductions.
Here are some tax moves to consider before the end of the year.
Disaster relief( Baltimore Sun photo by Gene Sweeney Jr. / August 30, 2011 )
This has been a big year for natural disasters nationwide. Marylanders weathered an earthquake and a hurricane/tropical storm within a single week in August.
For any damage to property that's not covered by insurance, you can deduct losses on your federal return, says Melissa Labant, technical manager with the American Institute of CPAs. The IRS has a formula to calculate losses, and the amount that exceeds 10 percent of adjusted gross income can be deducted on an itemized return.
But you don't have to wait until next year to claim the loss on your taxes, adds Barbara Weltman, author of "J.K. Lasser's 1001 Deductions & Tax Breaks."
If your area was declared a federal disaster site, she says, you can amend your previous return and claim the losses on it and get your refund earlier. "You will have some money to help you rebuild," she says.