7 Tax Savings and Financial Planning Ideas for your 1040

#1)   Qualified Energy Efficient Home Improvements.

Plan to make any qualified energy efficient home improvements in 2011? If so, you could be eligible for a credit equal to 10% of the cost of qualified energy-efficient property or improvements up to a maximum of $500.

Keep in mind though that credit amounts may differ based on the improvement made.

Examples include: insulation reducing heat loss/gain, exterior windows & doors, storm windows & doors.

There is a $500 lifetime limit. If you received over $500 in these tax credits from 2006-2010, you are not eligible for 2011 and beyond.

#2)   Health Savings Accounts (HSAs).

Are you covered under a high deductible health plan (HDHP)?

Are you not covered under any other non-HDHP, except Permitted Non-HDHP Insurance?

If so, HSAs can achieve tax savings in two ways: First, funds inside an HSA can be withdrawn at any time for medical expenses. Thus the HSA can be used

to accumulate tax-free income for use later in life. Secondly, HSAs can be

used to pay for current medical expenses. For people with few medical expenses,

HSAs have the effect of getting a deduction up-front rather than as an itemized deduction which may have little or no tax impact.

Contributions to HSAs are generally deductible.

For 2011, the maximum deductions for contributions are $3,050 for individual coverage, $6,150 for family coverage, and $1,000 for catch-up contributions.

#3)   Coverdell Education Savings Accounts  (Sec. 530 Plans)

Contributions are not deductible to currently save taxes.

But if you plan to give money to help pay for the qualified education expenses to someone under 18 (or a special needs beneficiary), this account grows tax free

and future earnings would be tax-exempt.

You can contribute up to $2,000 for 2011.

Contributions for 2011 can be made up until 04/15/12.

#4)   Retirement Accounts   (must have earned income of up to contribution, etc.).

2011 Maximum Allowed SEP Contribution is up to $49,000.

Under 50, 2011 Maximum Allowed Simple IRA Contribution is up to $11,500.

Over 49, 2011 Maximum Allowed Simple IRA Contribution is up to $14,000.

Under 50, 2011 Maximum Allowed IRA Contribution is up to $5,000.

Over 49, 2011 Maximum Allowed IRA Contribution is up to $6,000.

#5)   Consider converting to a Roth IRA in 2011.

Switching a traditional IRA to a Roth requires paying tax on the converted amount, but that can be a fabulous tax-saving investment because all future earnings

inside the Roth can be tax-free in retirement.

In 2011, there are no Modified Adjusted Gross Income (MAGI) limitations.

#6)   Other Timing Strategies

Any expense items that can be accelerated into this year?

(ex: taxes, interest, contributions, etc.)

Any income items that can be deferred until next year?

(ex: bonuses, other income, etc.)

Bunch expenses in one year if doing so puts you over the thresholds on Sch A.

(ex: contributions, medical, misc, etc.)

#7)   Any Investment Interest Expense?

Does any interest classify as Investment Interest Expense? If so, you can deduct this expense if you itemize your deductions on Sch. A.