There are some simple tactics that you can put in place now that will aid you trim your 2010 tax tab. They do not require complicated calculations or in depth research, just a quick review of your money management practices. April 15 is the time when everyone, including institutions, businesses, corporations, financial firms etc. have to submit with the reduction to income tax.
Personal income tax tips:
open an IRA for your non working spouse. You are allowed up to $2,000 a year in an IRA. However, in a traditional IRA, it is not fully tax deductible if you participate in an employer´s retirement plan, back to traditional IRA, so opening one for a non-working spouse allows the partner to stash away $2000 pre-tax. Another IRA issue to consider is recharacterization. Here is how it works. If you converted your traditional IRA to a Roth IRA, you will pay tax on the balance based on your bracket because Roth IRAs are funded with after tax money. If your holdings decrease in value, you can recharacterize the Roth back to a traditional IRA, then reconvert to a new Roth and pay taxes on the decreased holdings amount- thus cutting your total tax liabiltiy.
Donate appreciated assets to charity: both you and your charity can benefit if you give appreciated assets instead of selling the assets and donating the after tax proceeds. The amount of savings can be significant, depending on how much capital gains tax you would have paid on the sale.
Pay the proper amount 2010 estimated tax to avoid a penalty: the easiest way to ensure you do so is through the safe harbor knowns as the 100% rule. If you use the 100% rule, look at your total income tax obligation for the prior year. Take the information from the line that says total tax, divide it by four and mail in that amount each quarter.
Plan for your children´s college education: consider contributing $500 to an educational IRA for each child under age 18. A big if, as money withdrawn from an education IRA for non-educational purposes is slapped with a 10% penalty. If you place $500 a year into an education IRA as soon as your child is born and invest the money wisely, the balance in the IRA can be substantial by the time your child is of college age.