Here are a few ideas if you are looking to minimize your tax liability for 2011.
- Clean out your closet: Have a few dresses that you haven’t worn for a while? Some jeans that are two sizes too small? Time to purge! If your “stuff” is in good or better condition, charities will be happy to take it, and you get a tax break. All you need to do is determine the item(s) “fair market value” – what it would sell for in a thrift store. And get receipts for donations over $250.
- Upgrade your home: If you haven’t already maxed out your home energy tax credits in previous years, you have until Dec. 31st to do it. After all, that’s when the credit, which is worth 10% of the cost of new windows, doors, skylights, insulation, and heating and air conditioning systems (up to a maximum $500 credit), expires. For more specifics, including various restrictions, caps, and other details, go to www.energystar.gov.
- Prepay January Mortgage Payment: Your January 1 mortgage statement represents interest for the month of December. Paying it early – by the end of the year – boosts your deductions for 2011, and is something to think about it, particularly if you anticipate being in a lower tax bracket in 2012. Just make sure you get the check in the mail in plenty of time for it to arrive to your lender by the 31st. The added interest will show up on the annual statement that you’ll get from your lender in late January, detailing your deductible mortgage activity.
- Prepay Property Taxes: While we’re on the subject of homeowner payments and accelerating deductions, you may also want to consider prepaying your property taxes by December 31st and taking the deduction for 2011. Contact your county assessor’s office with any questions.
- Be Generous: Want to help your newly married son and his wife buy a new home? You and your spouse should consider taking advantage of generous estate and gift tax exclusions! Together, you can give the love birds up to $52,000 this year (or $26,000 per recipient), tax-free. And, if you’re so inclined, (perhaps you need to move assets out of your estate?), you can do it all over again on January 1, 2012.