DALLAS — At a time when most people are thinking about holiday plans, they also should be contemplating a less festive but still important subject — year-end tax planning.
The window of opportunity for many tax-saving moves closes Dec. 31. So set aside some time to evaluate your tax situation now, while there's time to affect your bottom line for the current tax year.
The failure of the special congressional super committee to reach a deficit-cutting agreement leaves many income-tax questions unanswered. But for tax planning for year-end 2011, it's pretty much business as usual, with a few twists.
"From the standpoint of year-end tax planning, this has developed into a boring year, which is actually in some ways good because it means there's nothing particularly exciting we need to do," said James Smith, managing director at the Dallas accounting firm Smith, Jackson, Boyer & Bovard PLCC.
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Regardless of what Congress does, there are savings to be had by taking advantage of tax breaks before they expire at the end of this year:
SALES TAX DEDUCTION
Taxpayers have the option of deducting their state and local sales taxes instead of state and local income taxes. For states like Texas that don't have an income tax, this means cold cash for those who itemize their deductions.
So if you're planning any big-ticket purchases, consider making them before the end of the year so you can deduct the sales taxes. Be sure to keep receipts.
"Unless Congress acts, this election won't be available after 2011," Smith said.
If you're age 70½ or older, you may contribute up to $100,000 of IRA funds directly to one or more qualified charities. The trustee of the IRA must be the one to send the gift directly to the charity.
Although you can't deduct your contribution, your gift is excluded from income, so it doesn't raise taxes on Social Security or Medicare premiums.
The gift also can count as part or all of your yearly required minimum distribution.
Teachers may deduct up to $250 of any unreimbursed expenses they incurred for books, supplies, computer equipment — including related software and services — and other equipment and supplementary materials they use in the classroom.
The deduction is $500 if you and your spouse file a joint tax return and both of you are educators.
For courses in health and physical education, expenses must be for supplies related to athletics to qualify.
Taxpayers may deduct up to $4,000 for qualifying tuition expenses paid for you, your spouse or your dependents.
Qualifying expenses include tuition and mandatory enrollment fees to attend any accredited public or private institution above the high school level. You can't deduct:
■ Room and board; optional fees, such as for student health insurance; transportation; or other similar personal expenses.
■ Course-related books and supplies, unless you're required to buy them directly from the school.
■ Any course involving sports, games or hobbies, unless it's part of the degree program.
In general, if you itemize deductions, you may deduct premiums paid for mortgage insurance provided by private insurers, the Department of Veterans Affairs, the Federal Housing Administration or the Rural Housing Service.
The amount you may deduct is limited if your adjusted gross income is more than $100,000, or $50,000 if married and filing separately.
No deduction is allowed if your adjusted gross income is more than $109,000, or $54,500 if you're married and filing separately.