With the end of 2011 closing in, now is a good time to make a few smart moves to reduce your tax bill. Some tax breaks are scheduled to expire this year.
Other tax credits will be around awhile longer, but it might make sense to claim them this year.
"This is the time to get organized and make sure you have the right expertise," says Elaine King, president and chair of the Financial Planning Association of Miami-Dade and managing director of Lubitz Financial Group in Miami. King and several other Florida financial experts share tax moves to make before the end of the year.
If you're in a giving mood, you'll want to take advantage of the jump in the gift-tax exemption. Consider giving money to your heirs up to your lifetime exemption without paying gift taxes while the amount allowed is at an all-time high of $5 million ($10 million for married couples). After 2012, the amount will revert to $1 million, unless a tax change occurs. "It's a good time to move money out of your estate and take advantage of depressed market values," says Rusty Spoor, a CPA and tax attorney with Spoor Law in St. Petersburg.
If you recognize a short-term gain this year from the sale of a stock or other asset, you will pay ordinary income tax rates, which could be as high as 35% (compared to 15% on a long-term capital gain). Consider selling anything in your portfolio that you've held more than a year and is now worth less than you paid to recognize a loss that could offset all or part of the short-term gain. This is called tax loss harvesting. "It's important to consider this because under the right circumstance, you have an opportunity for a bigger tax savings," says Steve Messing, director of tax services and real estate tax services at Berkowitz, Dick, Pollack & Brant in Miami.