Because many deductions, credits, and other tax benefits are reduced as your Adjusted Gross Income (AGI) goes higher, here are a few tips to consider to lower your AGI for THIS tax year:
- Convert taxable interest to tax-exempt interest.
- Even better, convert taxable interest to tax-deferred interest. Fixed annuities anyone?
- Increase contributions to retirement plans. This includes employer plans (401k and 403b), but also self-employed plans (SEP, SIMPLE, IRA)
- Increase contributions to a Health Savings Account (HSA).
- Pay up to $2,500 of student loan interest.
- Payback alimony in 2010.
- If you’re contemplating a move that would result in deductible expenses, pay them before the end of the year.
- Pay deductible tuition and fees before year end.
Now having said all of that, remember that the tax rates are set to go UP in January. You need to carefully plan so that you don’t make matters worse next year. I you haven’t contacted your tax professional to discuss your situation, do so. The clock is ticking, and you DON’T want to figure this out on your own!
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