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Seven Tax Ideas To Use Throughout The Year

Even people who pay estimated taxes get the summer off, with no payments due between June and September. But that doesn’t mean you should take a vacation from tax planning. By staying focused on this essential part of your financial life, you may be able to reduce your federal income tax liability for 2011. These seven timely tax moves could help.


1. Balance securities sales.Though it seldom makes sense to buy or sell stocks or other investments just to save on taxes, your transactions do have tax consequences. If it’s time to lock in a profit or limit your losses on a disappointing investment, you may be able to make a later sale that offsets that loss or gain, and if you end the year with excess losses you can use them to offset up to $3,000 of ordinary income (and carry forward losses that exceed that amount). Even if you end up with long-term gains (for securities you’ve owned for more than 12 months), they’ll be taxed this year at just 15%—a rate that could rise after 2012. Just be careful not to fall victim to the “wash sale rule,” which disallows losses if you reacquire substantially identical securities within 30 days.

2. Support favorite causes.Though you may make most of your charitable gifts in December, there’s no reason to wait until then. Just be sure to document what you give so that you can report it when you file your taxes. Meanwhile, non-profits appreciate receiving support throughout the year. If you donate securities, you can generally deduct their fair market value if you’ve owned an investment for at least a year. You’ll also avoid capital gains taxes that would have been due on a sale.

3. Duck the AMT.The alternative minimum tax (AMT) continues to extend its reach. Your potential liability under this tax is based on a complex calculation that considers all aspects of your tax situation, including investment income and itemized deductions. Asking your tax advisor to give you a mid-year checkup might point you toward adjustments you could make to avoid the extra burden of the AMT, which can add thousands of dollars to your tax bill.

4. Generate energy tax credits.To encourage conservation, the government lets you claim a tax credit equal to 30% of the cost of installing energy-saving improvements ranging from central air-conditioning or a new furnace to insulation materials. Work you do this summer could qualify you for a maximum credit of $500 in 2011.

5. Salvage exemptions for college grads.If you provide more than half of the annual support of a relative, such as a child in school, you may be able to claim a dependency exemption for the relative. Each exemption for 2011 is $3,700 (up from $3,650). In most cases, this applies only to relatives with no more than $3,700 in taxable income, but children under age 19 and full-time students under age 24 are exempt from that rule. If your child graduated this spring, you can still qualify if you meet the half-support test for 2011.

6. Stay within “vacation home” boundaries.Tax laws limit deductions for the expenses of renting out a vacation home if your personal use exceeds the greater of 14 days or 10% of the days the home is rented out. Exceed that threshold and you will be able to deduct your costs only up to the amount of your rental income. By keeping an eye on this rule during the summer you may find ways to stay within the limits. For instance, you might decide to cut your own vacation short by a day or two or rent out the home for an extra week. Also keep in mind that the time you spend at the place doing repairs and maintenance doesn’t count as personal use for this purpose—even if the rest of your family tags along just for fun.

7. Educate yourself about education credits.If you have a child entering college this fall, you need to know about the American Opportunity Tax Credit (formerly known as the Hope Scholarship) for qualified higher education expenses. This tax break was enhanced by recent tax legislation. The maximum annual credit is now $2,500, up from $1,800, and it covers all four years of college (it had applied to only the first two years). These enhancements had originally been scheduled to expire after 2010, but they have been extended through 2012. The only downside here is that you may earn too much to qualify for this credit, which begins to phase out for couples filing jointly who have a modified adjusted gross income of $180,000 ($90,000 for single filers).


INDEX
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  • How Social Earnings Taxation Has Changed
  • Why Aren't More Millennials Moving On Up And Out?
  • Taking Socially Responsible Investing To The Next Level
  • Don't Be Caught Red-Handed By The Wash Sale Rule
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  • Fed Chair Strikes A More Cautious Tone, But Still Expects Moderate Growth
  • Count Off 3 Tax Breaks For Higher Education
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  • Retirement Plan Choices For The Self-Employed
  • New Law Says Tax Debtors May Lose Their Passports
  • Compare Minor's Account To 529 Plan
  • Are You Being Socially Responsible?
  • 8 Smart Moves For College Grads
  • Seeking Financial Aid: Don't Fear The FAFSA
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  • HOW THE IRS RESOLVES AN IDENTITY THEFT CASE:
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  • Understanding Deflation
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  • When Should Millennials Start Retirement Saving?
  • Have Your Child Kick Into A Roth With A Reward To Boot
  • Sizing Up The Energy Boost To The Economy
  • A Stock Plunge Amid Strong Economic Data
  • 14 Top Year-End Tax Moves For Individuals In 2014
  • Drill Down For Three Key Oil And Gas Tax Breaks
  • When It Pays To ID Security Sales
  • GDP Growth Data Masks Strength Of The Recovery
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  • The Long-Term Fiscal Status Of The United States
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  • Should You Move To A Different State?
  • Tax Cost Of Being Your Own Landlord
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  • The Best States To Move To For Tax Purposes
  • 10 Reasons For The IRS To Flag Your Return
  • Many Women Face Special Challenges As Retirement Nears
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  • Straight Talk About Living Trusts
  • SEPPs From An IRA: Don't Change Horses Midstream
  • New Regulations Fill In Gaps On 3.8% Surtax
  • Do You Know Life Insurance Basics?
  • Top Income-Earners Drive U.S. Economic Growth
  • Give IRA Cash To Charity: Heads You Win, Tails You Win
  • Four Wash Sale Strategies To Help Clean Up Taxes
  • College Savings: How Much Do You Need Each Month?
  • Surprising New Research: Large Caps Top Small Caps
  • Newly Widowed Face 401(k), IRA Options
  • Retirement Saving Takes Time And Must Be A Priority
  • Divide-Conquer To Convert To Roth IRA
  • What Is Probate And What Does It Protect?
  • A Research Surprise On Bond Funds
  • After New Tax Law, Do You Still Need A Bypass Trust?
  • Start Estate Planning For Your Child Now
  • Seven Tax Ideas To Use Throughout The Year
  • A Comprehensive Way To Plan For College Savings
  • Bulletproofing Your Will Before Death
  • IRS Mercy on 60-Day IRA Rollover Error
  • Feds Warn Of Life Settlement Dangers
  • Know The Tax Rules On Charitable Gift Deductions
  • IRS Ruling Boosts IDTs as Estate Planning Technique
  • A Defined Benefit Plan Lets You Sock Away Large Amounts If You Can Overcome Some Obstacles
  • Economic Shifts Bring New Pitfalls And Prizes
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  • Ramifications Of A Weakening Dollar
  • Secular Versus Cyclical Bear Markets
  • Small Business And Work Opportunity Tax Act
  • Time To Plan For Estates, Wills, & Trusts



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