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Very Very Last Minute Tax Moves
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It’s December 28th, there are just three business days left in the year and you’re just now thinking about last minute moves you can make to reduce your tax burden. Fortunately, there are still a few things you can do on the very last day of the year to reduce your taxes. I won’t into great detail, you simply don’t have the time to read it, but you can do additional research on the items you think apply to you. Most of these will require that you itemize your deductions.
- Donate to charity – You can donate today with a credit card, claim the deduction for 2011, but pay it off when your statement is due in 2012.
- Make an extra mortgage payment
- Pay your property taxes
- Contribute to an IRA
- Take advantage of federal tax credits for energy efficiency
- Consider selling stock losers to offset winners (beware of the wash rule)
- Buy that new hybrid/electric car.
- Contribute to a 529 account
There you go, eight quick last minute tax moves that you can try with just a few days left to go. Hurry! (or not…)
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So how does making an extra mortgage payment reduce taxes? I assume that an extra mortgage payment would go towards the principle.
Contribute to an IRA – You have until April to contribute to your 2011 IRA.
Contribute to a 529 account – There is no end of year advantage. You receive the tax savings when you withdraw earnings on your contributions.
Some states allow 529 contributions to reduce your taxable income. Ohio is one of them.
In response to previous posts…..Paying down principal in your mortgage helps you pay less interest over time on your total loan. However, if you pay your January Mortgage payment in December, including tax, you get credit for that in 2011.
And depending on the state you live, you can get a state tax deductions for contributions to 529 plans.
SRD – The tax portion of your mortgage payment goes into escrow and will not effect any taxes. Only when the taxes are paid from your escrow do you get a deduction.
Jeff, SRD is right. Some states give tax deductions for 529 contributions. We live in Virginia, and had to just yesterday rush around and drive our 529 application and contribution check to the investment company office rather than mail it to make sure the receipt (not the postmark) was dated before the end of the year in order to get the state tax deduction. This move will save us about $200 on our state taxes for 2011.