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Home > Financial Press Releases > Year End Tax Planning and Preparation for Individuals Tax Tips for 2005
Year End Tax Planning and Preparation for Individuals -- Tax Tips for 2005
(PRWEB) December 2, 2005 -- Now is the best time to start thinking about your year end tax planning. These tax strategies can be put into effect by the end of the year and some as late as when the tax return is due. Planning now will save you money and reduce your tax liability not only with your IRS taxes but also with your state taxes. Here are tax tips that will help you accomplish your goal.
Minimize Capital Gains
Review your capital gains and losses for the year including taxable investment accounts and taxable real estate sales. If you have net capital gains, you may want to sell some of your investments that have a loss to offset the gain. You should also check your 2004 tax return for any loss carry forwards to 2005.
Sales Tax Deduction
Taxpayers who itemize deductions can choose between claiming the state income tax or sales tax as a deduction. The IRS will provide optional tables for use in determining this sales tax deduction if tax payers do not keep their receipts throughout the year. Sales tax paid on motor vehicles and boats may be added to the table amount up to the general sales tax rate.
Educator's Deduction
Eligible educators are permitted an "above-the-line" deduction up to $250 per year for non-reimbursed expenses incurred in connection with books, supplies, computer equipment and supplementary materials used in the classroom.
Open an Individual Retirement Plan Account (IRA)
You can open your 2005 IRA as late as April 15th of 2006. You may want to consider a Roth IRA. They are not tax deductible but also are not taxable when withdrawn at retirement.
New Energy Credits Available for 2006
New credits are available in 2006 for alternative motor vehicles and residential energy expenses. Information is coming about this so you may want to check back or bookmark this site (ctrl + d) or check the irs.gov website for updated information before you make these purchases in 2005. Please note these are credits and not deductions so they could have a significant impact on your taxes since they are a dollar-for-dollar reduction to your tax bill.
Get Organized
Clients always ask me what I need in order to do their taxes. For 90 % of the population, with a little organization, your tax preparation doesn't have to be overwhelming and can cost less if you submit organized documents to your tax professional. First, when you get those tax documents in the mail, have a folder ready to just drop it in there and forget about it until tax time. Most tax documents are required to be mailed by January 31st so you should have almost everything by the first week of February. If not, call to have them send a duplicate. Next, go through your check book, credit card statements and cash payouts for the basic deductible items. This would include your medical expenses including eye glasses, taxes paid including vehicle registrations, donations and any employer expenses that were not reimbursed. Don't forget day care expenses, student loan interest and tuition if any of those apply to you.
New Six-Month Extension
And for those of you who aren't able to get your return finished by April 17th, 2006, when you file your Form 4868 extension it will now be good for six months automatically rather than the previous four months.
Tax Planning for Your Business
These are just some tax tips you should consider when thinking about your year end tax planning. If you have a specific question about your particular situation, e-mail me at e-mail protected from spam bots and I will help you work through the tax planning issues you may have.
This article was intended to provide general information about year-end tax planning. It does not contain all the rules and exceptions that may apply to your situation. If you have further questions regarding year end tax planning.
Dianne Goodman, CPA - Specializes in servicing Small Businesses and Individuals.
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2005 Year End Tax Planning and Preparation for Individuals.
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