7 Things To Do Before Year End To Reduce Taxes

Purchase equipment for your business- You can take a deduction of 50% of the cost of furniture, fixtures & equipment purchased & placed in service in your business before 12/31/09. Items of personal property that have a useful life of more than one year are supposed to be depreciated, that is, the deduction for the cost of the item is spread out over several years. Instead of depreciating it over 5 to 7 years which allows you a small deduction each year, you can deduct 50 % in 2009. Don't forget the item must be used in your business. This provision may disappear next year!

Cancel or Rollover Your RMD for 2009- You do not have to take the Required Minimum Distribution for 2009. If you have already taken it you can roll it over to an IRA by November 30, 2009. See tomorrow's post for details.

Start a Business- If you don’t have a business- start one! Even if you have a W-2 job, you can have a business on the side. It must be a valid business that you spend time on. Then you can deduct expenses related to that activity to offset wage income. See article next week for more information.

Charitable Donations- Yes, the age old idea of cleaning out your closets and donating to Goodwill before the end of the year. But now you must be able to prove the items were in “good” condition. Take pictures, keep detailed lists and get receipts.

Incorporate Your Business- If you are going to receive a lot of income before the end of the year think of incorporating and transferring the income to either a C corporation or an S corporation. Both have ways to save you taxes. Call us for help.

Pay Both Installments of Your Property Taxes In December- Remember the only way this will help is if your income is going to be lower next year than this year. If you have high income this year due to bonuses or commissions, pay all of the property tax and take the deduction on 2009. If your income will be the same or higher next year you will need the deduction next year.

Sell Property on an Installment Sale- If you are selling property that will close by the end of this year and if by chance you have a gain on it, think of using an installment sale. It can be under any terms you and the buyer agree upon. Just have the buyer pay you part of the funds next year, say, in January. Then it's considered an installment sale by the IRS and you report part of the gain next year. It's complicated though. Watch next week's postings for more information.