10 Tax Deductions to Squeeze In Before 2012
NEW YORK (MainStreet) -- The end of the 2011 is just around the corner, but there's still time to save on your taxes. I have compiled a list of payments you can make this December to increase your 2011 tax refund or reduce your 2011 federal, and perhaps state, income tax liability.
A few things to keep in mind: You can use a bank credit card to buy deductible items in December and be able to deduct them on Schedule A. Also, the first seven items apply only if you will be itemizing deductions for 2011, so make sure you will be able to itemize before making any payments.
Cram in medical appointments
Time to cram in those trips to the doctor. The Internal Revenue Service lets you deduct your yearly medical costs as long as they exceed 7.5% of your 2011 adjustable gross income - a high percentage, but one you can meet by refilling your prescriptions, scheduling check-ups, eye exams and doctor visits, stocking up on deductible medical supplies and paying any outstanding medical bills this December. Also, don't forget to keep track of your round-trip mileage when driving to medical appointments.
Are you making quarterly state estimated tax payments, deducting state and local income tax and not state and local sales tax? If so, make the fourth-quarter payment that is due Jan. 16 in December. If you expect to have a balance due on your 2011 state income tax return, you can ask your employer to increase your state income tax withholding. Buy a car now (and save the receipt)
If you make the decision to deduct state and local sales tax instead of state and local income tax, or if your state does not have an income tax and you were planning to buy a new car, truck or motorcycle in early 2012, make the purchase in December. In fact, you may actually save money on a year-end deal. Many taxpayers do as I recommend and save all of their sales tax receipts during the year to see if it would be worthwhile to deduct actual state and local sales tax instead of using the Optional State and Local Sales Tax Table. If you will be deducting state and local sales tax, and the total tax from your accumulated bills will exceed the amount allowed in the table (you can use the Sales Tax Calculator tool on the IRS Web site), buy big-ticket items that are scheduled for purchase in early 2012 before the end of December.
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