Since taxpayers can offset up to $3,000 of ordinary income by selling losing stocks, Labrant advises clients not to trigger more losses than that to trim 2011 income.
Charity & Retirement
Taxpayers interested in making sizable charitable contributions can save money by donating appreciated investments rather than giving cash, note Neff and Labant.
Rather than making a $10,000 cash donation, for example, a taxpayer could make a gift of appreciating securities worth the same amount, take the charitable deduction, and avoid having to realize the gain on the stock, says Neff. This option applies to appreciated stock purchased at least a year earlier, adds Labant.
Those age 70½ or older who must take distributions from traditional IRAs may, this year, directly roll the distribution into a charitable donation. By doing so, they can avoid counting the IRA allotment as income."That will actually affect your bottom line," says Labant, who notes that this option ends on Dec. 31. The government continues to offer numerous education incentives in the form of credits or deductions. Labant notes that taking one education incentive might exclude using another, so taxpayers should see where they might save the most. The American Opportunity Tax Credit, which has been extended through 2012, offers a dollar-for-dollar credit for the first $2,000 spent on college and 25% for the next $2,000, and up to $1,000 of the credit is refundable, according to Labant. "That's my favorite one," she says. "It yields a bigger tax savings than, let's say, the tuition and fees deduction." The maximum $2,500 credit is income-based, but the parameters are generous, she said. The IRS Web site says the full credit is available to individuals with modified adjust gross income of $80,000 or less and to married couples (filing jointly) with income of $160,000 or less. Low-Hanging Fruit
Among other moves taxpayers might consider making this month: