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General Year End Tax Planning Tips

  1. Maximize capital losses to offset any gains. Be careful about using short-term losses to offset long-term gains because of the differences in tax rates. The long-term gain rate is 15%. For 2009 and 2010, if your income will be in the 10% or 15% tax bracket, the capital gain rate will be 0%.
  2. Consider converting investment income, specifically interest income, into qualified dividend income. Qualified dividend income will be taxed at the capital gain rate of only 15%.
  3. Sign up before the year-end with your employer for pretax spending plan deductions for 2010. These include medical savings plan and dependent care savings plans.
  4. For automobile usage, the standard mileage deduction was 55 cents per mile for all of 2009. The rate for 2010 will be 50 cents per mile.
  5. There is a deduction for the sales tax paid on the purchase of new car before 12/31/09.