Year-End Giving:

The end of the year is the traditional time for making gifts. For 2011, you may give up to $13,000 to a person without incurring any federal gift tax liability (the $13,000 annual limit applies to each donee).  If you are married, you and your spouse can give $26,000 to each person, if your spouse consents to splitting the gift or if you give community property.  To qualify for this annual exclusion, the property must be given outright to the donee on or put into a trust that meets certain conditions.

Charitable contributions (cash or property):

You must obtain written substantiation, in addition to a canceled check, for all charitable donations.

-          Charities are required to inform you of the amount of your net contribution, where you receive goods or services in excess of $75 in exchange for your contribution.

-          If the value of contributed property exceeds $5,000, you must obtain a qualified written appraisal (prior to the due date of your tax return, including extensions), except for publicly-traded securities and non-publicly-traded stock of $10,000 or less.

-          If you are considering contributing marketable securities to a charity and the securities have declined in value, sell the securities first and then donate the sales proceeds.  You will obtain both a capital loss and a charitable contribution deduction.





401(k) plan contributions: If you are a participant in an employer’s qualified plan (which includes a 401(k) plan) and are at least 50 years old, you can elect to make a deductible “catch-up” contribution of $5,500 to the plan.



-      If you are not eligible to make a Roth IRA contribution due to an income limitation, consider making a nondeductible contribution to a traditional IRA and then converting the entire balance to a Roth IRA. The conversion would be a fully nontaxable event if the conversion takes place immediately because the taxpayer would have basis in the full amount of conversion.

-      It may be beneficial to convert an existing IRA into a Roth IRA even though income will be accelerated and taxes will have to be paid. The advisability of converting depends on various factors, including the age of the taxpayer, current tax bracket, whether the taxpayer has funds from other sources to pay the income taxes on the accelerated income, and whether the  taxpayer intends to withdraw funds from the account after age 59½, or after 70½.

-      Two of the advantages of converting a regular IRA or eligible employer plan into a Roth IRA are avoiding the minimum distribution rules and avoiding income taxes on distributions after death to the beneficiary of the Roth IRA. Any decision to convert should also consider the estate tax effects.



-      Consider bunching miscellaneous itemized deductions into a year in which the two-percent-of-AGI limit will be exceeded. However, not all prepaid expenses, such as multi-year subscriptions to financial periodicals, are currently deductible.




Energy Tax Credits:

Individual taxpayers are allowed a nonrefundable income tax credit known as the non-business energy property credit, for certain energy efficient property placed in service in 2011 in the taxpayer’s principal residence. The credit equals ten percent of the sum of:

-          the amount paid or incurred by the taxpayer during the tax year for qualified energy efficiency improvements (i.e., building envelope components meeting certain requirements) installed during the taxable year, and

-          the amount of residential energy property expenditures paid or incurred by the taxpayer during the taxable year. There is a lifetime credit limitation of $500 with certain dollar limitations on residential energy property expenditures.