A couple months ago I highlighted Eight End of Year Finance Moves to prepare you for the new year.
Now that tax time is here, and all of your tax papers are organized, let’s walk back through each of those financial moves and see how they could impact your tax return.
If you itemize, you can deduct the value of the clothes, books, and household goods that you donated on Schedule A. In addition, you can deduct any cash donations you made to charities.
Prepaid Mortgage and Real Estate Taxes
Even if your mortgage or tax bill wasn’t due until January, you can deduct the amounts you prepaid in December on your 2010 taxes on Schedule A.
The amount you placed in your flexible spending account last year will be excluded from your taxable wages on the W2 that you receive from your employer. You won’t need to report it elsewhere on your tax return.
And just in case you didn’t request all of your money in your account by year end, many employers allow you to submit your receipts until mid March to claim unused funds.
Stocks Sold at a Loss
Report your losses on Schedule D. First, subtract all of your losses from any gains you had, then use remaining losses to offset your income by $3,000.
If you have more losses than that, you can save them to offset your income in future years.
529 Plan Contributions
You won’t get a federal tax deduction, however many states allow deductions if you contributed to the 529 run by your state. Instructions and limits vary by state, so check your state department of revenue site to determine which forms you need.
Roth IRA Conversions
Assuming you made Roth IRA conversions in 2010, you have two options to report the taxes due. You can spread it over two years or take it all in one year.
In addition, it makes sense to look at the value of your IRA now. If it declined in value since the conversion, you may want to consider a recharacterization to avoid paying taxes on the value of funds you no longer have.
What Congress Did
The new tax laws went into effect right at the end of the year, extending previous tax cuts. Be sure to review the new 2011 tax brackets to see how your taxes will change for the upcoming year.
In addition to the tax bracket changes, college tuition credits and child tax credits were extended for families.
Insurance Coverage Changes
If you made changes to your insurance coverage, it probably won’t impact your tax return unless you have a business.
Self employed individuals can deduct some of their health insurance coverages, including a special 2010 reduction in self employment tax. Report health insurance tax deductions on line 29.
Hopefully, this list provides some direction for those of you who do your own taxes and took advantage of some of these year end moves for the first time!
Did you get all your tax deductions this year?
|Madison DuPaix is a mom to three young children with a background in finance and insurance. She loves retirement planning and taxes, and recently started her own tax business. Madison is the author of My Dollar Plan and is the guide to Kids and Money at about.com.|