2011 is coming to a close, but before it does, there still may be time to take steps to lower your tax bill. accelerating certain expenditures for energy improvements, prepayment of tuition for the near future, and payments for medical procedures you been putting off. May have a significant impact on your taxes.
The 2010 tax credit for energy improvements on non business properties was extended through 2011. Eligible taxpayers can receive credit for 10% of qualifying expenditures. Qualified expenditures include energy efficient improvements to the building envelope of your main home. Most commonly exterior windows, insulation material designed to reduce heat loss, certain type of metal and asphalt roofs and natural gas, propane or oil furnaces. This credit is limited to a $500 lifetime limit and window replacement is limited to a $200.
Tuition and fees of up to $4,000 are allowed for qualified higher education expenses paid in 2011 or the first quarter of 2012. So if you’re going to be paying anyway consider a prepayment to help the tax bill. Qualified expenses include; expenses for you, your spouse or a dependent related to tuition, student activity fees, books, and supplies. However room and board, transportation, medical expenses, and other similar personal living expenses are not included. Accredited post-secondary institutions offering credit towards a bachelor’s or associate’s degree that participate in the Department of Educations student aid program are eligible. The deduction is limited to $2,000 for people with modified AGI of $65,000 ($130,000 married filing joint) and eliminated for modified AGI over $80,000 ($160,000 married filing joint).
Medical expense deductions are allowed for any portion of medical and dental expenses that exceed 7.5% of your adjusted gross income. After Dec, 31 2012 the limit will rise to 10% of your AGI. Expenses included are; acupuncture, alcohol abuse treatment, ambulance, birth control, breast pumps, capital expenses related to home modification, chiropractor, drug abuse treatment, dental treatments, fertility treatments including in vitro, hearing aids, home care, hospital services, and insurance premiums. Payments for you, your spouse, and dependents paid in the year you’re taking the deduction are eligible. So if you have procedures you anticipate in the near future it may be in your best interest, tax wise, to pay in advance.
These examples illustrate the need to talking with a tax professional. Planning for future events and understanding options available to you can payoff big time on tax day.