As 2011 continues to draw to a close we need to be thoughtful about our actions. We have to look at 2011 and 2012 with what we know and what we suspect may happen. Not always the best of actions.
Medical expenses still need to exceed 7.5% of AGI. Remember if you are part of a Section 125 plan the monies paid for medical and dental expenses are not tax deductible, they were paid with before taxed dollars. If you have had significant medical expenses already, get those prescriptions refilled. Get those remaining procedures (chiropractor, glasses, dentist, podiatrist) dealt with so as to maximize your deduction. If not hold off and push to 2012, there lies the great unknown.
State Taxes: If you expect a liability prepay before December 31 to take the deduction this year. In the past when a client had significant income they prepaid their property tax to maximize the deduction; this is a difficult determination to balance with the AMT. Is income going to be greater in 2012 or less than 2011?
Donations: A great deal of contributions are made at the end of the year. With the Christmas season churches get a huge influx of funds. Temples similarly get more for Hanukkah. This also is true for a most Not-for-Profits; we typically make the bulk of our charitable contributions at year end.
Reminder for non cash donations the paperwork needs to be meticulous. This has been an area of abuse for years and it is a heavy scrutinized are for the IRS. So much so that I discourage client for utilizing it on their returns. Make the donation for the donations sake not for the tax consequences.
With the capability or itemizing or taking the standard deduction each year, you have to determine what makes sense for 2011 and what makes sense for 2012.