This is a reprint from an article we posted a few years back, but I thought it was perfect as we head into the year’s final months.

As the leaves begin to turn and the air turns cooler, the end of the tax year approaches.  Pieces of your financial puzzle are likely falling into place, giving you a much better idea for how 2011 will be shaping up.  This enables you to get a rough idea of how much you’ll owe in taxes.  In an effort to lessen the pain, it is wise to take certain steps at year end.

Numerous strategies exist to help you, including reviewing professionally developed year-end tax checklists, performing a marginal tax rate analysis to ensure that you won’t be pushed into a higher tax bracket unnecessarily, and postponing income and accelerating deductions (or vice versa).

Year-end tax planning and investment decision making may sometimes result in substantial tax savings.  Of primary concern, is the timing and the method by which you report your income and claim your deductions and credits.  You should work to time your income so that it is taxed at the lowest rate possible, and to time your deductions so they are claimed during tax years in which you are in a higher tax bracket.

The following items are a few of the myriad of concepts your CPA should be discussing with you:

  • Shifting income amongst family members
  • For spouses, calculating both “married filing jointly” and “married filing separately” to determine any advantages
  • Recognizing when to take capital gains and losses
  • Considering any children or elderly parents you may be able to claim
  • Restructuring investments that may be tax inefficient.
  • Using appreciated stock or investments for charitable giving instead of cash

While taxes are not due until April 15th, the changes you can make to your tax situation greatly decrease upon the New Year.  To be sure you get to make the most of the opportunity, act soon.  Your CPA should be calling you in the next month if they believe there are adjustments that can be made in your favor.  If you haven’t heard from them, consider the concept of a “Prosperity Partner” who can be an advocate for you amongst your other advisors.  Contact us to learn more.