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Happy Holidays!

As the holidays have now snuck upon us and we are about to enter the final week of 2009, I thought it best to point out a few tax-saving strategies that can still be implemented before the 2009 tax year ends next week.  I know that everybody wants to enjoy the last week of 2009 and not think about taxes until January rolls around, but even if you only take advantage of one or two of the strategies listed below, you will be helping to lower your 2009 tax bill.   As always, please contact us if you have any questions or need assistance regarding the information below or any other matter.

Year-End Tax Planning for Individual Taxpayers

1. Prepay your mortgage payment that is due on January 1, 2010 by December 31, 2009.  You can deduct the interest on your 2009 tax return.
2. Charge deductible expenses like medical bills, state and local taxes, real estate taxes and charitable donations to your credit card.  By charging these expenses now, they become deductible in 2009 even if you do not pay the credit card bill until 2010.
3. Pay your state estimated tax payment that is due on January 15, 2010 no later than December 31, 2009.  This will count towards your itemized deductions on your 2009 tax return.
4. Sell stock losses before the year ends.  This will help to offset any capital gains and possibly enable you to take a loss of up to $3,000 on your 2009 tax return.
5. Maximize your charitable contributions and donate unwanted items before the year is over.  Please try to document the items that were donated and take pictures as well if possible.  Also, hold on to the receipts that you receive when donating.
6. Exhaust all of the funds contributed to your Flexible Spending Account (FSA) by year-end. You may be able to charge expenses for 2009 through March 15, 2010, but please verify this with your employer as this is at their discretion.  Any remaining funds after the spending deadline are forfeited.
7. Making energy-efficient purchases before year end will allow you to be able to take advantage of several tax credits that are available:

Receive a tax credit of up to 30% of cost with a maximum of $1,500 total for all home improvements made in the following areas:  Windows & Doors, Heating, Ventilating, Air Conditioning (HVAC), Insulation, Roofs (Metal & Asphalt), Water Heaters (non-solar) and Biomass Stoves.  This tax credit is currently only available for 2009 and 2010 tax years and only applies to an existing home that is your principal residence (new construction and rentals do not qualify).

Receive a tax credit of up to 30% of cost, with no maximum for all home improvements made in the following areas:  Solar Panels, Solar Water Heaters, Geothermal Heat Pumps, and Small Wind Energy Systems.  This credit is available through 2016 and can be used for both existing homes and new construction (may either be a principal residence or a second home, rentals do not qualify).

Year-End Tax Planning for Business Owners

1. For cash-basis taxpayers, pay any outstanding bills (this includes 4^th quarter payroll tax liabilities due on January 31, 2010) by December 31, 2009.  This will allow you to deduct the expense in the current tax year even though the payments may not hit your account until January.
2. Also for cash-basis taxpayers, remember that only deposits made to the bank and recorded on your books on or before December 31, 2009 are taxable in the current year.
3. For accrual-basis taxpayers, write off any non-collectible accounts receivable.
4. Also for accrual-basis taxpayers, remember that your revenues are calculated based on what you invoice between January 1, 2009 and December 31, 2009. Any invoices created after December 31, 2009 will be included in income for the 2010 tax year, regardless of when the service was provided or the product was delivered.
5. If you are planning on upgrading your computer or any other office equipment, try to do so before year-end.  This will allow you to take advantage of any holiday promotions that are in effect and you can write off the entire purchase amount for the 2009 tax year.
6. Write off any obsolete inventory as of year-end.