Financial Planning Ideas For Year End Tax Planning
Originally published Dec. 7, 2010
Here is are some financial planning ideas:
Consider the following strategies on gifting:
Start with the basics: Grandparents – and parents, for that matter – can avoid the gift tax by giving up to $13,000 per recipient per year to each child or grandchild. Above that amount, remember that the gift tax stands at 35 percent in 2010 but is scheduled to rise to 55 percent in 2011.
You can go farther: You can gift an additional $1 million all at once or over an extended period on top of each $13,000 gift by borrowing from the amount you’ll be able to shelter from the estate tax.
Opt to pay medical or tuition bills: If you pay a family member’s school or hospital directly, you may give an unlimited amount. It’s also important to know that you can do that on behalf of anyone, not just family members.
Don’t forget charity: Charitable giving is not something that’s done only in someone’s will. You can donate assets to a charitable gift fund or community foundation where your investment grows tax-free and you can designate charities you plan to give to before and after you die.
And keep in mind some general last-minute tax planning advice:
Max out your retirement contributions: For 401(k)s, you have until Dec. 31 to make your 2010 contributions. The limit per employee is $16,500 with an extra $5,500 allowed to taxpayers 50 and older. IRAs have later deadlines.
Empty your flexible savings accounts: Flex accounts must be emptied out by yearend (or by the end of your company’s standard grace period) or the money must be forfeited. Double-check the many items that qualify, because that list will get smaller last year – no over-the-counter medicines can qualify for Flex spending without a prescription.
Take advantage of energy credits: The Residential Energy Property Credit expires Dec. 31. Taxpayers spending for qualified improvements ranging from roofs to insulation and water heaters can qualify for a credit up to $1,500.
This article was produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Don Martin, CFP®, a local member of FPA.