There are only a few more days left this year, but business owners and individuals can still do some things to minimize their taxes for 2009 and 2010. What you do will depend on what sort of a year you’ve had.

If 2009 was a good year for you, you should consider paying all your bills this next week and getting them on your books before the end of the year. 

Some other business ideas:

• Consider a charitable contribution; not-for-profit organizations like the City Rescue Mission are finding themselves hard pressed with more people needing assistance and fewer people making donations. 
• Pre-pay expenses you know will be coming up in January. Individuals can only take advantage of this strategy with their mortgage payment and sometimes real estate taxes, but companies have more flexibility.
• The vehicle sales tax deduction for individuals is due to expire on December 31, so if purchasing a new car is on your “to do” list you might want to make it a priority.
• Invest in your retirement. Any salary deferral plans such as 401(k)’s or Simple plans need to be made by year end. However contributions to SEPs or IRA’s can be made in the following year through the due date of the return.
• If you’re planning to sell investments with gains, waiting until after January 1 will postpone the tax bite for another year.

If you’re an individual:

•  Make a charitable contribution before December 31.
• Make a charitable contribution this year of up to $100,000 directly from your IRA. You don’t need to report the income and then deduct it.  This strategy is especially important if you cannot itemize.
• Individuals aren’t required to take minimum distributions from retirement funds in 2009, so if you don’t need the money you can decrease your 2009 tax burden by leaving it where it is.
• Prepay mortgage payments and real estate taxes.
• Be sure to spend the balance of your Flexible Spending account by December 31 or you may risk losing it. Schedule doctor’s appointments and purchase medical supplies by year end.
• You and your spouse can gift up to $13,000 each (for a total of $26,000) to as many people as you would like without paying gift taxes.
• If you make the necessary purchases before December 31, there are several tax credits from which you may benefit. If you have a college student, you may be able to get a tax credit of up $2,500 for qualified education-related costs, such as textbooks, tuition, a computer, etc., through the American Opportunity Tax Credit.  Also, you could qualify for the federal tax credit of up to 30% off the product cost for any qualifying energy-efficient standards units and products. 

If your business was like many others and 2009 was a leaner year for you, you may not need to minimize your taxes. In anticipation of 2010 being better, businesses operating on a cash basis should push year-end expenses to January if possible. Take advantage of the 5-year net operating loss carry back to recapture some or all of the taxes you paid over the past 5 years.

Contact us if you’ve got specific questions that you’d like answered. We can be reached by calling 904-396-5400, or emailing Office@CPAsite.com.

Filed under: Tax by Adam Robinson