With the holiday season coming to a crescendo, boring issues like taxes aren’t the first thing to come to mind. But a few tax maneuvers should be on your holiday list if you want a happy, stress-free April.
Some of 2009’s tax matters can spill over to next year, like making this year’s IRA contributions. But others have to be done by Dec. 31. Here are some of the key ones:
Take tax losses. Sell money-losing investments by the end of the year to offset taxes on investments that were sold at a profit. If you lost more on Ford (Stock Quote: F) than you made on Google (Stock Quote: GOOG), the excess loss can be used to reduce ordinary taxable income by as much as $3,000. That could save you $750 in taxes, assuming a 25% tax bracket. If losses are bigger than that, they can be “carried forward” and used against capital gains or income in future years.
Postpone income. Unless you expect your tax bracket to fall in 2010, it’s better to pay taxes later rather than sooner. If you expect a year-end bonus, or if you bill customers, try to set things up to receive payment after Dec. 31, to postpone tax to next year.Speed up deductions. By the same token, it’s usually best to take tax deductions as soon as you can. Buy supplies and equipment for your business, or pay January’s property tax bill in December.
Flexible-spending plans. If your employer offers one of these plans for dependent care or medical expenses, you probably have to sign up by the end of the year to get the benefits in 2010. These plans provide an up-front tax deduction on contributions.