Accelerating Tax Deductions to 2009

After doing a preliminary 2009 tax return and forecasting our 2010 tax situation, we've decided to accelerate appropriate 2010 tax deductions to 2009 to maximize our Schedule A itemized deductions, and take the standard deduction for married filing joint in 2010. By my estimates, this will increase our total deductions by about $8000 for the two years, resulting in higher total refund of about $1200 over the two years.

Here are the tax deduction that we can accelerate to 2009 from 2010:

Charitable deductions. Charitable contributions are deductible in the year they are made. Our plan is to pay our 2010 pledges before December 31, 2009, to enable them being deducted in 2009. A extra benefit is the charity gets the money a little earlier.

Property taxes. In our county, property taxes are paid six month in arrears. For example, June, 2009 taxes are due in January, 2010. December, 2009 taxes are due in June, 2010. This year we will choose to pay all our 2009 property before December 31, 2009 and deduct them in 2009.

For reference, I also looked into the possibility of accelerating mortgage payments and health insurance payments as a way to increase itemized deductions. Unfortunately, I learned that accelerating these payments won't work, since the payment is required to be related to the current tax year to be deductible. Thus, prepaying our 2010 health insurance premium in 2009 is not deductible in 2009. It is only deductible in 2010. However, since mortgage payments are done one month in arrears, the January, 2010 mortgage payment is deductible in 2009, if made in 2009.

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This is not financial or tax advice. Please consult a professional advisor.

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