5 Tax Tips For Year End Tax Planning

Its November now and time to start preparing for our year end tax planning meetings. The tax code is so fluid and has been rapidly changing over the past few years that some of the things tax accountants were worried about at the beginning of the year have been repealed while others have been clarified. It is important to get with your tax accountant before the end of the year to get an understanding of what your tax situation will be like in the coming filing season. Doing so could save you more than the cost of the consultation either by executing tax saving strategies by year end or by avoiding interest and penalties by making sure you have paid enough taxes for the year.

Here are five tax credits for 2011 and/or 2012 that might help you save a bit in the upcoming filing season if proper actions are taken now. Keep in mind tax credits are dollar for dollar reduction of your tax, not your income, which is much more valuable.

SAVERS CREDIT:
This credit may be available to households with incomes less than $56,500. You must be 18 or older and have contributed to a specific qualified retirement plan including 401Ks and 403bs or IRAs. The credit is up to 50% of your retirement plan contribution for a maximum credit of $1000. This is in addition to the deferred tax benefits you receive from participating in these programs. The 2011 income limits for Single filers is an AGI of up to $28,250, Heads of Households with AGIs up to $42,375 and Married Filing Jointly filers with AGI up to $56,500 in the 2011 filing year.

CREDITS FOR HOME IMPROVEMENTS
Many of the tax credits for energy efficient home improvements were severely decreased after December 31, 2010. However, if you made qualified energy efficient improvements to your home in 2011 you may still qualify for a tax credit. For most of the improvements the credit is limited to a lifetime credit of $500 which means that if you took an energy credit for things like insulation, windows, doors and heating/air systems in the past and received a credit of $500 or more, you would no longer qualify for any further credits after 2010. If this is the first time you are claiming this credit you may be qualified to tax a credit for 10% of the cost up to $500 in credits. Act quickly, though, those credits expire as of December 31, 2011. There is also a 30% credit that exists through December 31, 2016 for solar energy systems, wind turbines for residences and geothermal heat pumps.

HEALTH INSURANCE CREDIT
Small businesses with under 25 employees may be able to claim this credit if the average wage of their employees is under $50,000 and they pay a portion of their employees health insurance costs. The credit is up to 35% of the non-elective contributions made on their behalf. The amount of the credit is dependent on the number of employees and the average compensation.

CREDIT FOR HIRING NEW EMPLOYEES
Hiring a member of an IRS identified target class can lead to a 40% credit of the first $6000 of wages paid to that employee. Disabled Vets, food stamp recipients and ex-felons are some of the classifications that qualify. Several conditions apply but be sure to ask about it in your tax planning.

RESEARCH & DEVELOPMENT CREDIT
This credit is currently due to expire on December 31, 2011. However, nearly every industry has credits that may reward businesses for daily efforts to improve an existing product line. There are many conditions, but be sure to ask your tax accountant about this credit.

Tags: small business, tax credits, tax credits 2011, tax planning, tax tips, year end planning, year end tax planning