By: Laurie Valentine, Trust Counsel & Chief Operating Officer
With December 31 fast approaching, now is a good time to review tax planning actions that you have already taken this year and to discuss with your tax adviser other things you may be able to do before year-end to further reduce your 2010 income taxes.
If you will be in a lower tax bracket in 2011, it may be prudent to defer some of this year’s income until next year and to pay deductible items that you would normally pay in early 2011 before December 31, 2010.
Business and professional people who use the cash accounting method may be able to defer the receipt of income by not billing until year-end for services rendered in 2010. The receipt of a bonus that your employer is free to give or not give can be deferred into next year to lower your 2010 compensation income.
Pay real estate taxes and the January 15 installment of state and local income taxes before December 31 to accelerate these deductible items into the 2010 tax year. If possible, pay all medical bills, if the total will exceed 7.5% of your adjusted gross income, before year-end to be able to use that expense as a deduction, if you itemize.
Another income tax deduction that is very easy to accelerate is the charitable deduction. You have total control on when this deduction will be available; all you have to do is complete your charitable gifts before December 31.
Your tithes and offerings are “charitable gifts” that can be deducted on your income tax return, if you itemize. You can also deduct gifts of appreciated securities, mutual fund shares, real estate, business interests, and life insurance policies to your church, Kentucky Baptist and Southern Baptist causes or other qualified charities.
Charitable income tax deductions are available for both outright gifts to charity and life income gifts such as charitable gift annuities and charitable remainder trusts.
Make time for year-end tax planning with your advisers; it can beneficial to you and to the charitable causes you wish to support.
The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.