Now that the elections are over and we have a lame-duck Congress for the next month, the big uncertainty involves how to properly plan for year-end tax planning. Will the Bush tax cuts be extended? Will the capital gains and corporate dividends tax rate stay at 15 percent? Will the estate tax be fixed? Will the alternative minimum tax be adjusted? Will business-related issues be extended such as bonus depreciation?
Let's assume that the outgoing Congress chooses to do the right thing and extends all sunsetting tax issues, letting the next Congress decide what to do in the long-term.
If you expect to be in a higher tax bracket next year, then your goal is simple. Accelerate income to be recognized in 2010 and defer deductions until 2011. If you are facing a lower tax bracket next year, then you do the opposite, accelerate deductions into 2010 and defer income into 2011.
Some simple ways to move normally 2011 deductions into 2010: Make your January mortgage payment in December. Consider having elective surgery done in 2010 instead of waiting until January (assuming your out-of-pocket portion of the bill is big enough to bump you past the 7.5 percent of adjusted gross income threshold.) If you owe state income tax, accelerate your tax payments to that state. Make planned 2011 donations to your favorite charity in 2010. Donate appreciated stock that you've owned for over a year to your favorite charity before the end of 2010. (You get to deduct the fair market value and don't pay any tax on the appreciation. If you sold the stock, then donated the cash, you would have to pay tax on the gain.)
If your goal is to increase 2010 taxable income, then reverse the above.
If you have a capital loss carryforward, consider selling any stocks with gains. You will get the stock gain "tax free" up to the amount of your loss carryforward. You can then buy different stock (not the same company) with the proceeds. On the flip side, if you have already sold some stock at a gain this year, consider selling stocks that you hold which would realize a loss to offset the capital gains.
Boost your federal income tax withholding if you think you are going to owe tax for 2010. The goal is to have paid 90 percent of 2010's tax bill or 100 percent of 2009's tax liability (110 percent if your AGI was $150,000 or higher).
If you expect to owe AMT, remember that state taxes and home mortgage interest are not going to help you, so accelerating those into 2010 wouldn't help.
Of course, estate tax has gotten a bit weird. Some experts are now talking about accelerating an expected death in 2011 (in case of a terminal disease) into 2010 if the estate is large enough. That's a whole column by itself. Like I said, weird, but not unexpected.
• Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459.