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Here are 5 ways to cut your 2011 personal income taxes like a tax pro:

  1. Review your 2011 securities sales for gains and losses – Review your capital gains and losses for the year. If you have capital gains, consider selling securities that have unrealized losses in order to offset your capital gains. You can deduct excess losses over gains of up to $3,000 and any amounts over $3,000 can be rolled forward to 2012 and beyond. And remember, in order to qualify for long-term capital gain treatment, you must hold the security for more than one year.
  2. Get an energy credit – Install energy-saving improvements in your home that qualify for the “residential energy credit”. The credit ranges from 10% of certain qualified expenses up to 100% of others, up to a maximum of $500. This credit is scheduled to expire after 2011.
  3. Assess your AMT landscape – If your CPA advises you that you will likely be subject to AMT (alternative minimum tax) in 2011, it may be possible to avoid unfavorable AMT results by postponing tax preferences to 2012. If you are in the regular tax bracket above 28%, it might benefit you to accelerate your taxable income into 2011. The extra income will be taxed at a lower rate than your normal rate. Review your prior year tax returns and look at line 45 on your form 1040 to see if you have paid AMT in the past.
  4. Group your medical expenses – Unreimbursed medical and dental expenses are deductible only to the extent that they exceed 7.5% of your AGI (See line 37 on your form 1040). Try to group medical and dental expenses in the calendar year that they can provide a tax benefit. If you’re close to the 7.5% floor for 2011, try to incur all the medical and dental expenses you can in 2011 that you know you will likely incur in 2012. Who knows, this may even put you in better health!
  5. Invest in qualified small business stock (QSBS) – As long as you meet certain requirements, you can exclude tax on 100% of the gain from QSBS held for at least five years. You need to include QSBS in your portfolio before 2012; the tax break is set to expire after 2011. If you happen to own the stock for more than six months but less than five years, you can roll it into another QSBS investment within 60 days of selling it without paying any tax.

Dan Lucas, CPA/ABV, Five Star Professional©

Managing Partner, Credo Financial Services

Dan Lucas
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