November is the time to set up your finances for the end of the year. You should look your finances over now and do a quick walk through of your anticipated income taxes for the tax year 2010. Financial windfall, poor economy, or selling of assets to just get by may hit your wallet with a huge tax bill in just a few short months. This is one area you cannot afford to wait to the last minute to line up your last minute tax deductions.
While many people do not think of their income taxes until it is time to file, business owners and self-employed people should be looking for their last minute tax write-offs now. December is the best time to donate to worthy causes. To be deductible, the cause must be registered with the Internal Revenue Service as a Non-profit organization. Donations do not have to be in the form of cash to be deductible, but there are specific guidelines that must be met or the IRS may reject your contribution.
Lower Your Taxes by Making Donations:
You can donate a car to a worthy charity. The fair market value of the car is deductible as are any expenses you incurred in giving the car to the charity. For example, if you pay someone to tow a car to the donation center, the cost of the tow truck is deductible if you are not reimbursed for it.
Donate clothing, household goods, food and other times as well. Be sure to get receipts with the fair market value listed so that you will not have any problems if the IRS decides to audit your return.
Donations are limited by your Adjusted Gross Income, so be sure to check your figures to see if it is better to donate more or less.
Lower Your Taxes With Last Minute Medical Expenses:
If you had high medical bills during the year that place you over the limits for filing Schedule A and itemizing your expenses, schedule last minute dental, eye and health exams. Try to get everything done before the end of the year so that you can claim the expenses on your income taxes.
Lower Your Taxes By Paying Outstanding Taxes:
Another good thing to pay off so that you can make the deduction on your income taxes is to pay off any outstanding taxes you may owe. This includes property taxes and state income taxes. If these amounts are paid by December 31, you will be able to claim them on your income taxes when you file next year.
Lower Your Taxes By Purchasing Last Minute Big Ticket Items:
If you are self-employed or own your own business, keep any profits your business may have earned by investing in any new equipment you have your eye on. If you need a new computer or a specialty item, now is the best time to invest in it. If you are under the Section 179 Expenses limitations, you will be able to write off the full cost from the business. This lowers your net profits and allows you to save on your income tax bill. If your state charges sales tax, you may be able to deduct the sales tax from your income as an expense in some states. Sales tax on big ticket items such as vehicles, furniture, or appliances qualify as deductible on New Mexico’s state income tax.
Lower Your Taxes By Buying Health Insurance:
Currently, any premiums paid for health insurance by self-employed people are 80 percent deductible. If you need a good tax right off that will help you and your family, consider taking out a health insurance policy. Be sure to pay the premiums this year to take full advantage of the tax deduction.
By using these guidelines and knowing your personal situation, you will be able to lower your tax burden. If you have any doubts or are not sure which way is best for you, be sure to talk to an accountant and receive guidance on your particular situation. Just so you know, the visit to the accountant is also tax deductible.
Read more from Sharyl Stockstill:
What is the Difference Between a 1099 and a W-2
Four Reasons You Should File Your Income Taxes, Even If You Don’t Have to