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.
Use IRA to give( Getty Images / March 24, 2006 )
This is the last year for those age age 701/2 and older to get a tax break for donating up to $100,000 directly from an IRA to a charity, says Mark Luscombe, principal analyst with CCH, an Illinois provider of tax information.
You dont get a charitable deduction, but the donation counts toward the required minimum distribution that older IRA owners must make annually. Charitable distributions also wont count as income on tax returns, which will lower your adjusted gross income. With a lower AGI, you might be eligible for tax breaks that you didnt qualify for before, Luscombe says.