How Can I Lower My Taxable Income?
Did you make more money this year? Did you have to pay a lot of taxes last year? Are you wondering if there’s any way to lower your taxable income? The year isn’t over yet! If you are looking for ways to lower your tax liability, here are some things to consider that might help you!
Do you own a business that has made a profit this year? If your business has made a profit and you have furniture, equipment, computers, & vehicles that you need to purchase and/or you have leasehold improvements that you have been putting off, you may want to consider paying for these items before December 31, 2011. You may be able to take up to 100% depreciation for assets purchased in 2011.
Do you have an HSA account? If you have high deductible health insurance with a deductible of at least $1,200.00 (self)/ $2,400.00 (family), you may qualify for an HSA account. An HSA account allows you to contribute up to $3,050.00 (self coverage)/ $6,150.00 (family coverage) depending on the deductible amount you are responsible for. Qualified contributions lower your AGI giving you more tax benefit then if you were to claim your medical expenses as itemized expenses. You have until April 17, 2012 to make contributions for the tax year 2011. The money in your HSA remains tax free as long as your contributions don’t exceed the allowable amount, and any money spend is for medical expenses and prescription drugs.
Do you have an IRA? You may be able to put money into a traditional IRA and deduct this amount from your AGI. There are tax penalties for early withdrawal of this money so if you want more flexibility on withdrawing the money out of the IRA, you may want to consider a Roth IRA. Roth IRAs don’t qualify for the above the line deduction, but you may qualify for a credit.
Do you itemize deductions? If you itemize deductions, you can lower your tax liability by paying the balance of your Real Estate Taxes in 2011 and donating to qualified charitable organizations.
Do you have improvements that you need to do to your house? There are still tax credits available for 2011 for qualified home improvements. If you are looking to do home improvements that include insulating, windows, furnaces, air conditioners, or other improvements that are energy efficient and you haven’t utilized the Residential Energy Credit in prior years, you may qualify to take advantage of this credit (up to $500.00). You’ll want to be sure that the items you are installing qualify for this credit by checking with the manufacturer.
If you have any questions on whether or not you qualify for any of these tax incentives or if you would like to do some tax planning with us, please feel free to contact our office.