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University of Massachusetts Amherst

Family Business Center

Develop Your Tax Strategies Now

The following actions may help you save taxes if you act before year-end. Not all actions will apply in your particular situation, but you could benefit from many of them.

  • Realize losses on stock while substantially preserving your investment position. You can sell the original holding, then buy back the same securities at least 31 days later.
  • Postpone income until 2010 and accelerate deductions into 2009 to lower 2009 taxes. However, in some cases, it may pay to accelerate income into 2009 if you expect a lower marginal tax rate next year.
  • If you expect to owe state income tax when you file your return next year, consider increasing your withholding (or pay estimates) before year-end to accelerate the deduction.
  • You might save taxes this year and next by applying a bunching strategy to itemized deductions and medical expenses. Consider using a credit card to prepay expenses.
  • If buying a car, do so before year-end to nail down a deduction for state sales tax and excise tax on the purchase.
  • If you prefer a Roth IRA to a traditional IRA, consider converting deflated value traditional-IRAs into Roths, if you’re eligible. Note that this conversion will increase your 2009 income.
  • If you own an interest in a partnership or S corporation you may need to increase your basis in the entity so you can deduct a loss from it for this year.
  • Adjust your withholdings to eliminate or reduce underpayment penalties.
  • Make energy saving improvements to your home, such as adding insulation or installing energy saving windows, and qualify for a tax credit.
  • Businesses should consider making expenditures that qualify for the up to $250,000 expensing option. Expenditures placed in service this year may also qualify for 50% bonus first year depreciation.
  • If self-employed, consider establishing a retirement plan.
  • First time home purchases made before Dec. 1, 2009 may qualify for an up-to-$8,000 credit.
  • Required Minimum Distributions from a retirement plan or IRA taken earlier this year may be rolled back into an eligible retirement plan or IRA before Dec. 1, 2009.

These are just some of the year-end steps that can be taken to save taxes. Consult your accountant now so they can tailor a particular plan that will work best for you.

By Kristina Drzal Houghton, CPA, MST, Partner In Charge of Taxation. Meyers Brothers Kalicka, P.C. 330 Whitney Ave., Holyoke, MA 413-536-8510.