So here it is… After hours on Friday, December 30, 2011. You had the best of intentions to do some sort of tax savings strategy before the end of the year and you blew it. You’re done. Or are you?
It turns out that there’s still time to do a couple of things to save a few tax dollars. Here are a few last-minute (and I mean really last minute) tax savings strategies:
1. Make a charitable donation. It’s a pretty good bet that most charities aren’t accepting non-cash charitable donations throughout the night and on Saturday but you still have time to make a charitable donation. If the charity allows you to donate online, you can do it right up until the last second of 2011. If the charity doesn’t accept online payments, make sure you get the check in the mailbox: a check that you mail to a charity is considered delivered on the date you mail it. If you pay by phone, the date the financial institution pays the amount is the date you make a contribution. You have to itemize your deductions for this to make sense; check out this prior post for more on charitable donations.
2. Pay some bills. If you know that you’re going to meet the threshold for medical expenses (7.5% of your adjusted gross income or AGI), consider making some payments now. Buy those contact lenses or glasses now or prepay those monster dental bills. If you pay by credit card, the deduction counts so long as you make the charge by the end of the year. Similarly, if you’re paying by check, make sure you mail it on or before December 31, 2011. However, if you’re not going to meet the threshold, there’s no need to accelerate your payments: consider pushing them off to 2012 in the event that the deductions are more useful in the next calendar year.
3. Prepay your mortgage. If you itemize, consider making your January mortgage payment today or tomorrow. If you make the payment by December 31, 2011, the deduction for the mortgage interest paid will be deductible in 2011. Of course, the flip side is that you won’t get to take that month’s interest in 2012; if you’re already maxed out on useful deductions, consider taking a pass.
4. Pay the tax man early. If you itemize and you pay your own real estate taxes (as opposed to your mortgage company making those payments), pre-pay those first-quarter payments for 2012 by year-end in order to take the deduction. A quick word of warning: you’ll lose the ability to take the deduction under the AMT. If you’re subject to the AMT, making a prepayment doesn’t make sense.
5. Take a trip to your local hardware store. For 2011, you can make energy-efficient improvements to your home and qualify for a tax credit. The credit was reduced significantly from what was allowable in 2010; for 2011, the credit is limited to 10% of cost of the improvements up to a cap of $500 or a specific amount depending on the nature of the improvements (there’s a $200 cap on windows for example). If, however, you’re investing in geothermal heat pumps, residential small wind turbines, or solar heating systems, the credit is equal to 30% of the cost with no limit – chances are, though, that you won’t be able to pick those up at your Home Depot.
6. Pay your attorney or tax accountant – or buy your tax prep software in advance. Like you didn’t see this one coming… But it’s still sensible advice. If you itemize, you can deduct the cost of legal fees relating to personal tax advice though be aware that the deduction is subject to the 2% limitation on miscellaneous itemized deductions; tax prep fees, including the cost of software, are likewise deductible. Make your payment by year-end – either online or by check to make it count for 2011.
7. Make a contribution to your IRA plan. If you have an IRA, you still have time to make qualifying retirement contributions and get the saver’s credit on your 2011 tax return. This one you don’t even have to rush: you have until April 17, 2012, to set up a new individual retirement arrangement or add money to an existing IRA and still get credit for 2011. However, elective deferrals must be made by the end of the year (yes, tomorrow) to a 401(k) plan.
See? There’s still time to get some deductions in under the wire – though your time is getting shorter by the minute (and even shorter still if you’ve got festivities planned for tomorrow evening). What are you waiting for?