Deduction in Year Paid: An expense is only deductible in the year in which it is actually paid. If your tax rate is going to increase in 2012, it is a smart strategy to postpone deductions until 2012.

Payment by Check: Date checks before the end of the year and ail them before January 1, 2012.

Promise to Pay: A promise to pay or providing a note does not permit you to deduct the expense. If you pay by credit card in 2011, you can take the deduction even though you won’t pay your credit card bill until 2012.

AGI Limits: For 2011, the overall limitation on itemized deductions is terminated. Certain deductions may be claimed only if they exceed a percentage of AGI: 7.5% for medical expenses (Includes amounts paid as health insurance premiums. Consider bunching medical expenses into years when your AGI is lower), 2% for miscellaneous itemized deductions, and 10% for casualty losses.

Standard Deduction Planning: For 2011 the standard deductions is $11,600 for married taxpayers filing jointly, $5,800 for single taxpayers, $8500 for heads of households, and $5,800 for married taxpayers filing separately. To maximize the benefits of both the standard deduction and itemized deductions, consider adjusting the timing of your deductible expenses so that they are higher in one year and lower in the following year. You can do this by paying in 2011 deductible expenses, such as mortgage interest due in January 2012.

State Taxes: If you anticipate a state income tax liability for 2011 and plan to male an estimated payment, consider making the payment before the end of 2011.

Charitable Contributions: Consider making your charitable contributions at the end of the year. This will give you use of the money during the year and simultaneously permit you to claim a deduction for that year. For claimed donations of cars, boats and airplanes of more than $500, the amount available as a deduction will significantly depend on what the charity does with the donated property not just the fair market value of the donated property. If the organization sells the property without any significant intervening use or material improvement to the property, the amount of the charitable contribution deduction can’t exceed the gross proceeds received from the sale. To avoid capital gains, consider giving appreciated property to charity. Regarding charitable contributions remember the following rules: (1) No deduction is allowed for charitable contributions if clothing and household items if such items are not in good used condition or better. (2) The IRS may deny a deduction for any item with minimal monetary value. (3) The restrictions in (1) and (2) don’t apply to the contribution of any single clothing or household item for which a deduction of $500 or more is claimed if the taxpayer includes a qualified appraisal with his or her return. Charitable contributions of money, regardless of amount, will be denied a deduction, unless the donor maintains a cancelled check, bank record, or receipt from the donee organization showing the name of the donee organization, and the date and amount of the contribution. A special provision gives taxpayers the ability to distribute tax-free to charity up to $100,000 from a traditional or Roth IRA maintained for an individual whose has reached age 70½. This expires at the end of 2011, so you would want to take advantage of it now.

Bonus Depreciation: Tax payers can claim 100% bonus depreciation for assets places in service in 2011. Bonus depreciation is also allowed for machinery and equipment used exclusively to collect, distribute, or recycle qualified reuse and recyclable materials and qualified disaster assistance property. In 2012, the bonus depreciation amount is scheduled to be reduced to 50%.

Child Tax Credit: A tax credit of $1,000 per qualifying child under the age of 17. In order to qualify for 2011, the taxpayer must be allowed a dependency deductions foe the qualifying child (the child must be younger than you). The credit is phased out at a rate of $50 for each $1000 (or fraction of $1000) of modified AGI exceeding the following amounts: $110,000 for married filing jointly; $55,000 for married filing separately; and $75,000 for all other taxpayers. A portion of the credit may be refundable. For 2011 the threshold earned income level to determine refundability is set by statue at $3,000.

Credit for Adoption Expenses: For 2011, the adoption credit limitation is $13,360 of aggregate expenditures for each child, except that the credit for adoption of a child with special needs is deemed to be $13,360 regardless of the amount of expenses. The credit for ratably phases out for taxpayers whose income is between $185210 and $225,210. For 2011, the credit is refundable. For 2012, the credit is scheduled to become nonrefundable.

The American Opportunity (The HOPE) and Lifetime Learning Credits: The maximum credit for 2011 is $2,500 (100% on the first $2,000, plus 25% of the next $2,000) for qualified tuition and fees paid on behalf on a student (i.e. the taxpayer, the taxpayer’s spouse, or a dependent) who is enrolled on at least a half-time basis. The credit is available for the first four years of the student’s post-secondary education. For 2011, the credit is phased out at modified AGI levels between $160,000 and $180,000 for joint filers, and between $80,000 and $90,000 for other taxpayers. 40% of the credit is refundable, which means that you can receive up to $1,000 even if you owe no taxes. The term “qualified tuition and related expenses” includes expenditures for “course materials” (books, supplies, and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance). One way to take advantage of the credit for 2011 is to prepay the spring 2012’s tuition. In addition, if your child’s books for the spring semester are known, those can be bought and the costs qualify for the credit. The Lifetime Learning credit maximum in 2011 is $2,000 (20% of qualified tuition and fees up to $10,000). A student need not to be enrolled on at least a half-time basis so long as he or she is taking post-secondary classes to acquire or improve job skills. As with the American Opportunity Credit, eligible students include the taxpayer, the taxpayer’s spouse, or a dependent. For 2011, the Lifetime Learning Credit is phased out at modified AGI levels between $102,000 and $122,000 for joint filers, and between $51,000 and $61,000 for single taxpayers.

Coverdell Education Saving Account: For 2011, the aggregate annual contribution limit to a Coverdell education savings account is $2,000 per designated beneficiary of the account. This limit is phased out for individual contributors with modified AGI between $95,000 and $110,000 and joint filers with modified AGI between $190,000 and $220,000. The contributions to the account are nondeductible but the earnings grow tax free.

Student Loan Interest: You may be eligible for an above-the-line deduction for student loan interest paid on any “qualified education loan.” The maximum deduction is $2,500. The deduction for 2011 is phased out at a modified AGI level between $120,000 and $150,000 for joint filers and between $60,000 and $75,000 for individual taxpayers.

Kiddie Tax: For 2011, the kiddie tax applies to: (1) children under 18; (2) 18-year old children who have unearned income in excess of the threshold amount, do not file a joint return and who have earned income if any, that does not exceed one-half of the amount od the child’s support; and (3) children between the ages of 19 and 23 and if, in adition to the above rules, they are full-time students. For 2011 the kiddie tax threshold amount is $1,900.

Small Employer Pension Plan Startup Cost Credit: For 2011, certain small business employers that did not have a pension plan for the preceding 3 years may claim a nonrefundable income tax credit for expenses of establishing and administering a new retirement plan for employees. The credit applies to 50% in qualified administrative and retirement-education expenses foe each of the 1^st three plan years. The maximum credit is $500 per year.

Employer-Provided child Care Credit: For 2011, employers may claim a credit up to $150,000 foe supporting employee child care or child care resource and referral services. The credit is allowed for a percentage of “qualified child care expenditures” including for property to be used as part of a qualified child care facility and for resource and referral expenditures.

Work Opportunity Credit: The work opportunity credit is an incentive provided to employers who hire individuals in groups whose members historically have had difficulty obtaining employment. This gives your business an expanded opportunity to employ new workers and be eligible foe a tax credit against the wages paid. Wages paid after 2011 are not eligible for the credit.

Credit for Employee Health Insurance Expenses of Small Employers: For tax years beginning after 2009, eligible small employers are allowed a credit for certain expenditures to provide health insurance coverage for its employees. Generally, employers with 10 or fewer full-time equivalent employees (FTEs) and an average annual per-employee wage of more than $25,000. The credit is phased out completely for employers with 25 or more FTEs or an average annual per-employee wage of $50000 or more. The credit amount is 35% of certain contributions made to purchase health insurance.