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.
Harvesting gains, losses( Getty Images / November 14, 2011 )
Because its been such a wild year on Wall Street, you need to pay attention to whats going on in your portfolio, Weltman says.
A tried-and-true tax strategy is to offset any capital gains on the sale of investments with any capital losses. If you have more losses than gains, you can use up to $3,000 of excess losses to offset ordinary income. And any losses above that can be carried forward to offset future gains.