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10 WAYS TO SAVE MONEY ON YOUR 2011 TAXES!
By Andrew D. Schwartz and Lawrence B. Keller
The window of opportunity for many income tax saving strategies closes on Dec. 31. That being said, it’s not too late to cut your income taxes by considering some of the following strategies prior to year end.
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Increase your employer sponsored retirement plan contributions
Employer sponsored retirement plans present an opportunity to contribute funds on a pre-tax basis. This year you can defer up to $16,500 into your 401(k) or 403(b) plan. By Dec. 31, 2011, anyone age 50 or older can put away an additional $5,500.
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Self-employed? Consider a solo 401(k) before Jan. 1
A solo 401(k) plan allows a self-employed person to reach the $49,000 retirement plan maximum with a lower income compared to a SEP-IRA, and also allows a person age 50 or older to put away $54,500 into a retirement plan for 2011.
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Consider selling investments that have declined in value
Consider selling investments held in non-retirement accounts that have decreased in value since your capital losses can offset other capital gains realized during the year (including mutual funds). Excess losses can then be used to offset up to $3,000 of wages and other income. Make sure to wait at least 31 days before buying back a security sold at a loss, or the IRS will disallow the loss under the "wash sale" rule.
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Consider selling investments that have increased in value if you are in the lowest tax bracket
Consider selling investments that have increased in value if you are in the lowest tax bracket since the capital gains rate for you will be zero percent, and this rule is slated to expire on Dec. 31, 2012. You can then buy back those securities, and the "cost-basis" will be the higher amount. This strategy will save you taxes down the road when you sell these securities. Just make sure that the capital gains don't push you out of the 15 percent tax bracket, or you'll be taxed on gains that fall outside that bracket.
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Pay deductible expenses early
If you itemize deductions, it might help you to pay deductible expenses like qualifying interest, medical costs, and state and local taxes before the end of the year, instead of waiting until 2012. For example, if you send in your January 2012 mortgage payment early enough so that it’s processed prior to Dec. 31, 2011, you can deduct the interest portion of that payment a full year earlier. If you will be itemizing your deductions, and are not subject to the alternative minimum tax (AMT), pre-pay your projected state tax shortfall and maybe even next year’s real estate tax bill. Also make sure to pre-pay or pay off your medical bills, if your total medical expenses exceed 7.5 percent of your income.
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Review your withholdings
Take a look at your withholdings, and instruct your employer to withhold additional taxes if you haven’t had enough taxes withheld during the year to avoid an underpayment penalty.
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Look into depreciation and expense limits
Whether you're a small business owner or a self-employed individual, you're allowed a first-year depreciation deduction of 100 percent of the cost of qualifying property acquired and placed in service during 2011. This "bonus" first-year additional depreciation deduction will drop to 50 percent for property acquired and placed in service during 2012. For 2011, the maximum amount that can be expensed under IRC Section 179 is $500,000, but in 2012 the limit will drop to $139,000.
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Deduct energy-efficient home improvements
This is the last year to claim credit for energy-efficient improvements made to your home (up to 10 percent of the cost of qualifying property). Improvements can include a qualifying roof, windows, skylights, exterior doors, and insulation materials. Specific credit amounts may also be available for the purchase of energy-efficient furnaces and hot water boilers. However, there's a lifetime credit cap of $500 ($200 for windows). So if you've claimed the credit in the past—in one or more years since 2005—you're only entitled to the difference between the current cap of $500 and the amount you've claimed in the past.
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Clean out your closets and donate
Do your spring cleaning now — before the end of the year. Clean out your closets and donate your clothing and household items to a charitable organization, since "non-cash" contributions are deductible if you itemize. Don’t forget to get a receipt. You should make a list of each item donated, along with its condition. Remember, only donations of clothing and household items in "good condition or better" qualify for a deduction. To track what you donate, go to www.mdtaxes.com and download the Non-Cash Contribution Worksheet (Excel or the PDF versions), or use the UDoGood Application (www.udogoodapps.com). For gifts of money, making your donation by credit card before Dec. 31 allows you to deduct the donation on your 2011 income tax return, even if you don't pay your credit card bill until 2012.
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Seek advice from the pros
Implementing effective year-end tax strategies requires a complete understanding of the rules that are in effect for both 2011 and 2012. It also requires you to be familiar with your overall financial situation. A CPA or other financial professional can help you evaluate potential opportunities as well as keep you apprised of any last minute legislative changes that might impact your ability to partake of any tax advantages.
Andrew D. Schwartz, CPA is a partner in the Boston CPA firm Schwartz & Schwartz, P.C. and is also the founder of The MDTAXES Network, a national network of CPAs who specialize in tax and accounting services for the healthcare profession. He can be reached for questions or comments at (800) 471-0045 or by email to Andrew@mdtaxes.com.
Lawrence B. Keller, CLU, ChFC, CFP, is the founder of Physician Financial Services, a New York-based firm, specializing in income protection and wealth accumulation strategies for physicians. He can be reached for questions or comments at (800) 481-6447 or by email to Lkeller@physicianfinancialservices.com.
While all stories in this publication have been approved for inclusion, each article represents the perspective of the individual author and should not be construed as advice from the AAD or the Young Physicians Committee. •
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WHAT'S HOT FOR YOUNG PHYSICIANS IN SAN DIEGO?
Registration is now open for the 70th Annual Meeting in San Diego, March 16 – 20. Below are some special recommendations for sessions that may be of particular interest to young physicians. All events will be held at the San Diego Convention Center (CC) unless otherwise noted.
Friday, March 16
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Sharing Mentoring Experiences Breakfast, San Diego Marriott Hotel, Marina Ballroom G, 7:30 to 9 a.m.
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C03A-D: Basic Self-Assessment of Dermatopathology, offered four times on Friday; 7 to 9 a.m., 9:30 to 11:30 a.m., 12:30 to 2:30 p.m., and 3 to 5 p.m.
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S002: Hot Topics, 9 a.m. to 12 p.m.
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S008: Late Breaking Research, 2 to 5 p.m.
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U026: New Health Care Policies: Incentives and Penalties, 2:30 to 4 p.m.
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Young Physician/New Member Reception, San Diego Marriott, Ballroom C, 5 to 6:30 p.m.
Saturday, March 17
Sunday, March 18
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U071: Social Media and Dermatology: How Twitter and Facebook Will Help You and Your Practice, 7 to 8 a.m.
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D014: Managing Office Politics: Private Practice, Academics and Everything in Between, 7 to 8 a.m.
Monday, March 19
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U105: Emerging Laser and Aesthetic Technology, 7:15 to 8:45 a.m.
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C024: Basic Contact Dermatitis, 9 a.m. to 12 p.m.
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F061: Young Physician Pearls and Pitfalls: A Survival Guide for the First 10 Years, 12 to 2 p.m.
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S041: Innovative Uses of Technology to Modernize Delivery of Dermatologic Care and Education, 2 to 5 p.m.
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U133: Smartphone and Cloud Computing in Dermatology and Dermatopathology, 2:30 to 4 p.m.
Tuesday, March 20
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U145: 50 Adverse Drug Reactions to the Skin, 7:15 to 8:45 a.m.
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F084: Medical Dermatology Challenge: Complex Cases from the Collection of Dr. Samuel Moschella, 9 a.m. to 12 p.m.
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S046: Key Surgical Principals We Should All Know, 9 a.m. to 12 p.m.
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F092: Surgical Cases We Wish We Could Do Over, 12 to 2 p.m.
In addition to these courses, check out the listing of leadership development courses on the Leadership Institute website.
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YP FOCUS BACK IN 2012: HELP US HELP YOU
Young Physician Focus is returning to print in 2012, thanks to a generous contribution from Merz Pharmaceuticals, LLC. This popular publication for (and by) young physicians includes articles on practice management, trends, personal stories, technical and financial advice, clinical pearls and other practical tips. Don’t worry, the print publication will not be replacing the e-newsletter, but will be a welcome addition to the wealth of resources for young physicians. You'll have the best of both worlds!
We are now accepting articles for consideration for 2012. What are we looking for? Review past issues of Young Physician Focus at the Academy website. If you have a story to tell, or an idea for a story that you think needs telling, contact Dean Monti, managing editor of special publications at the AAD, at dmonti@aad.org. Drop us a line — editors get lonely, too!
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