It’s hard to believe, but 2010 is already half-way over. How are you doing at hitting your financial goals for the year, and are you taking advantage of the tax benefits this year is bringing? It’s time to consider a six-month financial check-up. Here are some items to consider for the remainder of the year.
Review expiring tax credits. There’s still time to take advantage of energy efficiency tax credits for installing such items as energy-efficient windows or heating/air conditioning units. These credits are slated to expire December 31, 2010.
Consider income and expenses with 2010 tax rates. An increased tax rate for individual income is looming in 2011. If you have the ability to accelerate your income into 2010 rather than 2011, it may be a tax advantage to do so. In addition, deferring your expenses into 2011 may also be to your advantage.
Look at your withholding on wages and estimated tax payments. By looking at your withholding amount now, you’ll still have time to adjust it and meet any additional needs, rather than waiting until the end of the year to discover a shortfall. Similarly, you’ll also have time to meet any additional estimated tax responsibility.
If selling investments, take time to determine the basis now. If you’ve sold stock, mutual funds or property recently, pull the financial information now, while it’s still fresh in your mind. It will be much easier to find the information now and save time when preparing your federal and state taxes later.
Make your IRA contribution, if you like. If you’re feeling confident that the market has stabilized, you could go ahead and make your IRA contribution for the year.
Let your accountant know if you have out-of-state investments or partnerships. Cash-strapped state governments are becoming more aggressive in pursuing non-resident taxes. In one case of a client, an eight-day investment resulting in a tax notice from the state of California. Letting your accounting professional know now about the situation will allow ample time to research the filing requirements for your 2010 federal and state tax filings.
Consider making large gifts yet this year. As a result of the impending higher tax rate for individuals, large taxable gifts will be taxed at a higher rate in 2011, making it more attractive to make such gifts during 2010. Since there has been discussion about changing this tax rate for 2011, if you’re hesitant to make the gift now, consider preparing the paperwork to make the gift so you’ll be ready to take action by the end of the year if necessary.
For business or rental property owners, consider equipment purchases or improvements. The IRS Section 179 deduction for equipment and property improvements is more generous in 2010, with a limit of $250,000, making it a great time to make equipment purchases or property improvements. If you were considering doing such expenditures in the future, it may be a tax advantage to expedite your plans to occur in 2010.