Ah, the holidays.
A time for family, for festive yuletide fun, for contemplative reflection and for thinking about your taxes.
Yep, taxes. Sure, it’s a good couple of months before you need to filter through your paperwork and determine what you owe. But local accountants say it’s never too early to think about taxes, because a few financial adjustments before Jan. 1 could make a big difference in your IRS bill come April.
Here’s how you can ease your tax burden this spring:
■ Make credit work for you. We know: It’s Christmas, and after spending on holiday gifts, you probably want nothing more than to put your plastic on ice. But credit cards can be a valuable tool for minimizing what you owe at the end of the year, tax preparers say.
Real estate taxes, self-employed business expenses, medical costs — as long as they’re on your credit card by midnight, Dec. 31, you can write them off on your 2010 return in April, said Roni Kerfien, general manager and franchise owner of Roni Deutch Tax Center in North Las Vegas. And you don’t even need to pay off the expenses before year’s end for it to count.
“Whether you’ve paid the balance on your credit card or not, those creditors have been paid, according to the IRS’ point of view,” Kerfien said.
That makes it easier to move some January expenses to December.
If you run a business out of your home office and you need a new computer, buy it now. If you’ve racked up a lot of medical expenses this year and you still need routine care including eye tests, dental exams or physicals, schedule them this week, if possible. The law allows taxpayers to write off medical expenses totaling more than 7.5 percent of their gross income. If that doesn’t sound like a lot to you, consider that an individual on unemployment might earn $22,000 to $23,000 a year, so at $1,725, that 7.5 percent floor kicks in, Kerfien noted.
“If you have a couple of kids and they’ve been sick or needed dental work or physical exams, you may very well have spent enough to qualify,” she said.
College tuition and other mandatory school fees are also deductible for earners making less than $80,000 a year individually or $160,000 a year per couple, so if you can, make that January payment today to write it off in April.
■ Boost your write-offs. December is also a good time to buy tax credit-qualifying products such as energy-efficient insulation, windows, doors or appliances, as well as hybrid cars. Not only will you get to claim the purchases in April, but 2010 is also the last year those investments will qualify for credits, Kerfien said.
Before you invest, though, make sure the write-off well hasn’t run dry on the item you’re buying. When John Crowhurst, a tax preparer with Jackson Hewitt Tax Service in Las Vegas, recently bought a Toyota Prius, he found that all the federal money to subsidize credits on the car had been spent. Research whether credits are still available at www.irs.gov.
Nevadans can also deduct sales taxes they’ve paid in the year, so if you’re planning soon to buy a big-ticket item such as a car, moving the purchase to late December will land that deduction on your 2010 return. Remember that if you want to write off sales taxes on a large item, you’ll need to be able to itemize all the sales taxes you paid in the year, which means you should have receipts on all your purchases, from Starbucks coffees to groceries. Otherwise, plan on using IRS tables to determine your uniform sales tax write-off.
Finally, taxpayers can also write off job-search expenses that exceed 2 percent of their gross income, noted Wally Magda, president of Complete Financial Services in Las Vegas. If you can, pull some of those planned costs, such as preparing and copying resumes, making long-distance phone calls to prospective employers and attending career-counseling sessions, into 2010. To qualify, you’ll need to be looking for a job in the same line of work you’ve been in.
■ It’s not too late to play Santa. You can write off any donations made to charity groups as long as they’re official by Dec. 31. Just remember that you’ll need receipts to claim your gifts, whether they’re cash or goods. If you’re contributing a noncash item that’s worth more than $500 — say, a computer or a car — you’ll also need to be able to produce paperwork documenting where you bought the product and how much you paid for it, Crowhurst said.
Kerfien recommended taking pictures of the items you’re donating.
“A picture gives the item credibility, and you can put a higher price on it as far as what it’s worth,” she said. “Most people giving away a bag of clothes will just value it at $50, but if you have five or six T-shirts in it that you bought for $20 each, a couple of dresses you bought for $25 or $50 and a coat you bought for $60, if they’re in good condition, you can deduct half of those purchase prices.”
Having photos that show the clothes are clean and in good condition will help your case if the IRS has questions about your return.
“If you have a picture and a receipt, the IRS usually doesn’t bother with it,” Kerfien said.
■ Cut your losses now. If you’ve had a bad year in the stock market, sell your worst performers now. You can claim the losses on your April return, Crowhurst said.
■ Get married. You can more than double your standard deduction for 2010 if you tie the knot by Dec. 31, Kerfien said. Even if you wed at the last possible minute, you’ll qualify as married for tax-filing purposes for all of 2010. That means you’ll be able to file a joint return as long as you marry by the end of the year.
The same goes if you have a baby by Dec. 31: You’ll be able to claim the child tax credit for all of 2010. But giving birth is a little harder to plan in a mere week.
■ Get your 2011 deductions in order. It’s never too soon to plan ahead. Tax preparers recommend you revisit your W-4 form and carefully go over the deductions you’re claiming before Dec. 31 so that you can reap the full withholding amount you’re eligible for next year.
This one’s especially important if you’re divorced and you share custody of your kids, Kerfien noted. Often, only one parent gets to claim a child as a dependent, and when physical custody is jointly held, the credit usually goes to the parent who spends the most on taking care of the kids. Make sure now that 2011 will be your year to include your kids on your return.
“A lot of people fight over the kids for tax season,” she said. “They didn’t change their withholding status at work, and now they’re coming up short.”
Contact reporter Jennifer Robison at
email@example.com or 702-380-4512.