Year End Tax Moves for Individuals
*** Postpone income until 2012 and accelerate deductions into 2011 to lower your 2011 taxes. Doing so may allow for larger deductions and credits that normally are subject to income phase outs, especially if you expect to be in a lower tax bracket next year. (Of course, doing the opposite may be more beneficial, depending on the circumstances.)
*** Cashed in some big gains this year? Want to reduce your 2011 tax liability by year end? Look for losses in your stock portfolio and consider selling them before year end to offset your gains.
*** If you’re trying to achieve a tax loss with minimal change in your portfolio’s asset allocation, keep in mind the wash sale rule. It prevents you from taking a loss on a security if you buy a substantially identical security within 30 days before or after you sell the security that created the loss.
*** Increase your withholding if you are facing a penalty for underpayment of federal estimated tax. Doing so may reduce or eliminate the penalty.
*** Take required minimum distributions (RMD) from your employer sponsored retirement plan if you have reached age 70 ½. Failure to do so can result in a penalty.
*** Make annual exclusion gifts before year-end to save gift tax. You can give $13,000, tax free, in 2011 to an unlimited number of people.