[Photographs: iStockphoto]

Elaine King

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.

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For Individuals

Gifting

Rusty Spoor

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.

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Selling

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.

Donating

Steve Messing

Dec. 31 is the deadline to contribute to your favorite charity and claim the gift amount on your 2011 tax return. If you own a stock or other asset that's gained value and you're willing to part with it, you can give it directly to charities that accept such gifts. The non-profit gets the stock that it can sell. You get to deduct the asset's value as a charitable gift. Even better, you won't owe any capital gains taxes on the appreciation (if you've owned the asset more than a year). The deduction you receive equals its current value, and you can claim the full amount, says Steve Messing, of Berkowitz, Dick, Pollack & Brant in Miami.

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Retirement Planning

You can contribute up to $16,500 tax-free to your retirement through your company 401(k). If you're over age 50, you can sock away an additional $5,500 catch-up contribution for a total of $22,000. The amount contributed lowers your taxable income. If you don't have a 401(k), you can make a deductible contribution to a traditional IRA, but at a smaller amount. The contribution limit for 2011 is $5,000. If you're over age 50, you can sock away an additional $1,000 catch-up contribution for a total of up to $6,000 out of your taxable income. "That money is better off in your retirement account growing tax-deferred than being taxed currently by Uncle Sam," says Ana Maria Martinetti-Katz, director of financial planning at Cathy Pareto and Associates in Coral Gables.

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Redirecting

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If you're age 70½ and you don't need the money from your traditional IRA for living expenses, you can make a charitable donation directly out of your IRA up to $100,000. Making such a move can be helpful if your IRA has appreciated significantly over the years and you have to take required minimum distributions. "The added benefit is that you get to exclude that distribution from gross income," says Elaine King, of Lubitz Financial Group. If you're married and file a joint return, each spouse could make the donation. The rule is scheduled to expire Dec. 31.

For Businesses

Accounting

Take a hard look at your methods of accounting for tax purposes to make sure you're using the most advantageous approach for computing taxable income. For example, scrutinize whether you should use a cash or accrual method of accounting. If you have deferred revenue, look at whether you could defer for tax purposes the recognition of that income to a later year. "You can end up paying less taxes and you can use the cash to reinvest in your business," says Leo Chomiak, an international tax partner at Grant Thornton in Fort Lauderdale.

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Seeking Opportunities

If you have a Florida business with plans to expand into other cities, states or international markets, you may have opportunities for tax credits incentives and/or tax holidays. Check with state and local government to see whether they offer credits or other incentives for hiring and training of employees. There are tax credits and grants offered for using alternative fuel or implementing energy-saving initiatives. If you have operations abroad, you may be eligible to get a preferential income tax rate. "There are some tax savings there that companies sometimes don't realize are available," Chomiak says.

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Investing

Tae Shin

You can reap a tax benefit by investing in an environmentally friendly technology business such as a solar power company or a wind farm. If structured as a sale-leaseback or partnership flip arrangement, the investment could yield a significant tax benefit in form of credits, accelerated depreciation or special allocations of income. "In addition to the return on investment, the tax benefits are especially attractive to business investors with income from other sources," says Tae Shin, a business taxation attorney at Roetzel & Andress in Orlando.

Buying

Ana Maria Martinetti-Katz

There's a huge tax incentive to make capital improvements in your business this year. If your company needs new computers, phones, machinery or other equipment up to the purchase price of $2 million, you can take a deduction on your 2011 tax return. This would be instead of recovering the cost of those investments through annual depreciation spread over many years. In 2011, you are able to take a deduction of up to $500,000. That's double the $250,000 allowed in 2009. "If you have the money, it's smart to buy equipment now to increase your tax savings," says Ana Maria Martinetti-Katz, of Cathy Pareto and Associates. Next year, the allowable amount of that deduction is set to drop to $125,000. However, King, of Lubitz Financial Group, cautions that one of the biggest tax concerns for small-business owners is mingling personal and business expenses — everything from dining out to mileage. "Make sure you keep good records, have separate accounts and pay for business expenses from your business account."

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Retirement Planning

Business owners may want to consider creating a defined benefit plan before year-end. Depending on the amount of earned income in 2011, an owner may be eligible to defer more than $195,000 in 2012. While this may be costly to set up, it is advantageous in the long run because you will be able to contribute and deduct up to 10 times more than you would with a traditional 401(k). "I have worked with several law firms helping them decide if a defined benefit plan makes sense," says King. In one case, she says, a law firm was able to save $50,000 in taxes. By doing this, you are not only able to defer money for your retirement, but you also can save taxes for your company, she says.

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Tax Preparation Changes

New IRS regulations designed to protect taxpayers now require that all paid tax return preparers are registered with the IRS and hold a personal tax identification number. Paid tax return preparers previously had no registration requirement with the IRS. Over the next two years, preparers who are not attorneys, certified public accountants or enrolled agents will be required to pass a minimal competency test and will also need to take annual continuing education courses to obtain registered tax return preparer designation.