Use this Tax Action Plan to note the ideas that will benefit clients now.


1.  Take advantage of nontaxable income.

2.  State tax refund may not be taxable.

3.  Deduct gambling losses up to the amount of gambling winnings.

4.  Do not assume that Social Security benefits are taxable.


5.  Get something for nothing with the standard deduction.

6.  Identify all qualifying medical payments.

7.  Deduct long-term care expenses.

8.  Include all state and local tax payments in the itemized deductions or elect to deduct sales tax (usually for states without income tax, set to expire 12/31/11).

9.  Pay 4th quarter state estimated tax payment by December 31st.

10.  Deduct all real and personal property taxes.

11.  Deduct the mortgage interest on a primary home and a second home.

12.  Deduct the points in the year a primary home is bought.        

13.  Deduct the interest when money is borrowed to buy investments.

14.  Keep records of cash charitable contributions.

15.  Document noncash charitable contributions to get the maximum deduction.

16.  Appreciated property gifts to charity.

17.  Determine what qualifies as a casualty and take the maximum deduction for the loss.

18.  Bunch miscellaneous deductions into one year.

19.  Deduct moving expenses when a new job causes a move.

20.  Use Health Savings Accounts to reduce the cost of medical care.

Exemptions and Filing Status

21.  Give the exemption deduction to the family member who will benefit most.

22.  Choose the best filing status each year.

23.  Marriage may not be the answer.

24.  If single, file as a head of household if possible.

Tax Credits and Payments

25.  Reduce tax with the child tax credit.

26.  Reduce tax with the dependent care credit.

27.  Increase refund with the earned income credit.

28.  Change the tax planning strategy when the client is subject to the alternative minimum tax.

29.  Reduce tax while saving fuel costs with home improvements and electric cars.

30.  When adopting a child, be sure to claim the adoption credit.

31.  Stay on the IRS’s good side by following the rules for household help.

32.  Using a Form W-4, set withholding to the amount of tax you expect to owe.

33.  Make estimated tax payments to avoid underpayment penalties.



Education Planning

34.  Use a qualified tuition savings plan or a prepayment tuition plan to save even more for college.

35.  Scholarships may be tax-free.

36.  Use Coverdell Education Savings Accounts to save for college and let the money grow tax-free.

37. Deduct interest on higher education loans.

38.  Claim Lifetime Learning credits for continuing education courses.

39.  Use the American Opportunity tax credit to significantly reduce the cost of college.

40.  Deduct education expenses when the American Opportunity tax credit is not available.

41.  Allow children to claim either the American Opportunity tax credit or Lifetime Learning credit.




42.  Deduct capital losses against capital gains.

43.  Make sure to deduct all costs when you sell an investment.

44.  A more favorable tax rate can be paid on dividends.

45.  Select one of several options for calculating gain or loss when selling shares in a mutual fund or a dividend reinvestment plan.

46.  With taxable bonds, choose when to report interest income.

47.  Defer and possibly exclude interest income from U.S. Savings Bonds.

48.  Buy municipal bonds and not pay tax on the interest income.

49.  Use options to defer gains.

50.  Deduct your losses from worthless stock.

51.  Investing in small business stock has its advantages whether selling the stock at a gain or a loss.

52.  Deduct nonbusiness bad debts as short-term capital losses.

53.  Sell your life insurance policy and get more than cashing it in for the cash surrender value.

54.  Reduce tax by investing in rental real estate.

55.  Avoid tax by trading property for similar property.

56.  Defer gains from the sale of property using the installment method.


57.  Compare the pros and cons of renting versus owning a home.

58.  Exclude up to $500,000 of gain from the sale of a home.

59.  If a home is declining in value, convert it to business or rental use.

60.  Deduct home office expenses.

61.  Significantly reduce the costs of owning a vacation home by renting out the vacation home.

62.  Move to a low-tax or no-tax state before receiving a large gain.

Fringe Benefits

63.  Save money by taking advantage of fringe benefits employer provides.

64.  Participate in tax-free health insurance and medical reimbursement plans.

65.  Increase take-home pay by taking advantage of dependent care assistance plans.

66.  Go back to school, have an employer pay for it, and exclude the tuition costs from income.

67.  Take advantage of other tax-free fringe benefits that an employer offers.

68.  Tailor the benefits with a cafeteria plan.

Start Your Own Business

69.  Reap the tax benefits of starting a business.

70.  Use the 20 factors to show independent contractor status.

71.  Avoid having a business classified as a hobby.

72.  Deduct the full cost of equipment, computers, and furniture purchases.        

73.  Use a personal car for business and deduct car expenses.

74.  Write off 100% of health insurance premiums for a family, and if they are a small employer, take a credit for health insurance premiums for their employees

75.  Deduct tax return preparation fees against the business income.

76.  Hire their children in their business.

77.  Choose the right business entity for the client.

Retirement Plans

78.  Use IRAs to save for retirement and let money grow tax-deferred.

79.  Make IRA contributions to a Roth IRA so all future withdrawals are tax-free.

80.  Convert an IRA to a Roth IRA so all future distributions are tax-free.

81.  Even a nonworking spouse can contribute $5,000 to an IRA.

82. Encourage employers to set up a qualified retirement plan or 401(k) and take advantage of it.

83.  If self-employed, have the client set up his or her own retirement plan.

84.  If self-employed, the client can set up a solo 401(k) plan to contribute even more to a retirement plan.

85.  Contribute up to $14,000 to a SIMPLE plan, either IRA or 401K.

86.  If the client is 50+, contribute an extra $1,000 to their IRA and an extra $5,500 to their 401(k).

87.  Avoid 50% penalties on distributions from retirement plans.

88.  The client may be able to withdraw money penalty-free from a retirement plan or IRA before age 59 ½.

89.  Consider the ways to get money out of a retirement plan.

90.  Borrow money from an IRA for less than 60 days without paying tax or penalties.


91.  Work with spouse to reclassify child support as alimony.

92.  When dividing property in a divorce, look at the after-tax values of the property.

93.  Before the client is divorced, you may be able to use the abandoned spouse rule to claim head of household filing status.

94.  By getting custody of children in a divorce, client may claim the exemption deduction, file as head of household, and take the child care credit.

95.  Deduct payments for tax-related legal advice.        



Family Tax Planning and Special Situations

96.  Avoid the kiddie tax by choosing investments that do not increase children’s taxable income.

97.  Reduce future tax by making gifts to others.

98.  Keeping property until death can reduce the income tax heirs pay.

99.  There are special tax advantages if someone served in the military.

Working With Your Tax Adviser

100.  Do not throw tax returns away.

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