- Compare the benefit of accelerating deductions and postponing income under new law which provides for an extension of low tax rates through 2012.
- Consider taking a tax free distribution from your IRA up to $100,000 to satisfy charitable contributions.
- Review gifts to children and grandchildren
- Annual exclusion gifts of $13,000 to each donee ($26,000 for married couples)
- Direct payment of education or medical expenses
- Taxable gifts of the lifetime exclusion amount of $1 million
- Intra-family loans to children or grandchildren to take advantage of low interest rates
- Gifts directly to or for the benefit of grandchildren and more remote descendants in 2010 to take advantage of the 0% rate on generation skipping transfers. (There are still questions on the application of the generation skipping rules in 2010, please contact your adviser to discuss your own situation.)
Think about converting your tax-deferred IRA to a Roth IRA before the New Year to provide the most flexibility regarding payment of the tax due. If you convert in 2010, you may elect to pay the tax with your 2010 return or to spread the liability over the 2011 and 2012 tax years.
Consider charitable gifts of appreciated property to avoid capital gains tax and to obtain an income tax charitable deduction, taking into consideration limitations on deductions and the five-year carryover rule. If the property has depreciated in value below the amount you paid for the property, sell the property and donate the cash. You may offset the loss against other capital gains.
Confirm year-to-date estimated tax payments and federal and state income tax withholdings to avoid 2010 underpayment.
Verify you have made the maximum amount of tax-deferred contributions to retirement plans.
Ensure you have made the required minimum distributions for 2010 from retirement plans that are in pay status.