We are in that strange week which, for most, begins in one tax year and ends in another.
That means you have a couple of decisions to make that can ease your tax burden, and perhaps a couple of days to make them.
The end of the year is a good time to review how much you have made this year and how much you plan to earn next year. We like to see that number go up every year, but it is by no means guaranteed. A number of journalists can plainly see that 2011 likely is to pay them less than 2010 has.
Although it might seem crazy to spend money when your income is declining, it could save you money as you get ready for the next phase in your career. If you expect your income to decline, you could trim your tax bill by paying now for work-related:
- equipment and software
- dues and registrations
- classes and training
- travel
If you can see you’ll need to spend $2,000 in the next 12 months and will be slipping from a 30-percent tax rate to 20 percent, putting that much in qualified expenses into this year could save you $200.
The same holds true for charitable contributions but, depending on where you give, watch for state limits on annual giving. (In Michigan, for example, I get a direct tax credit, but it has an annual limit.)
Students who are about to graduate also should consider whether they want to buy software while they can take advantage of their academic discount.
Career questions? E-mail Joe for an answer.
Coming Tuesday: How to determine whether a move is an advance
