Tax Tops: Investment shuffle - time for year-end tax planning

Another year is almost gone - with a little effort, you may be able to save some taxes to help pay for all those Christmas gifts.

Here are a few simple ideas:

• Consider shifting income and expenses between 2009 and 2010. The goal is to reduce your total tax bill combined for these two years. It doesn't help much if you save tax in one year and have to pay it in the other. Currently, the top tax rates are expected to stay the same for 2010.

• If you normally don't have enough deductions to itemize in either year, but come close, consider doubling up in one year, such as prepaying your 2010 charitable contributions in 2009, prepaying your 2010 property tax in 2009, prepaying your January mortgage payment in 2009, prepaying your tax preparation fee, and if you have enough to get past the AGI limitation, prepay medical expenses too.

• If you are in a position to shift income by deferring paychecks, commission payments, independent contractor fees, rents, closely held corporate dividends, etc., you might benefit. The key is not to bump you into a higher tax rate in 2010; that nullifies the reduction in tax in 2009.

• Consider donating highly appreciated stock. You must have owned the shares for longer than one year. You don't pay tax on the appreciation in value, but you get to deduct the full value as a charitable contribution.

• The first-time homebuyers credit of $8,000 is expected to be extended a few months into 2010. Congress is looking at expanding this to give $6,500 to buyers who've owned a home for five of the last eight years.

• Sales tax paid on vehicles in 2009 can be deducted regardless of whether you itemize or not.

• Look at your investment portfolio. Do you have deferred losses from 2008 that you could offset against some gains you could take in 2009? You may even qualify for a special zero-percent rate on long-term gains and dividends. Don't buy into a mutual fund near year end until after they have recorded their most recent dividend payout. This avoids the trap of "prepaying your tax bill" by paying a higher market price, receiving taxable dividends and then your market value is reduced by those dividends.

• There are no required minimum distributions for IRAs if you are age 70 and older for 2009, but must start again in 2010.

• Business owners can consider purchasing assets to get special extra depreciation deductions. Small businesses can purchase up to $250,000 and expense 100 percent if you have income to offset against it. Also, special rules for purchasing large SUVs (over 6,000 lbs) allow for larger first-year deductions than other vehicles.

You should plan on sitting down with your CPA to discuss these and other end of year topics while there is still some time left before 2009 is gone.

• Kelly Bullis is a Carson City certified public accountant with more than 30 years of experience. Contact him at 882-4459.