Q Is it true that I can prepay some of my 2010 expenses and deduct them on my 2009 tax return?
A Yes. There are several things you can do. If you don't think your personal income tax bracket will be higher next year, and you're not affected by the alternative minimum tax, you can make state and/or local tax payments before the end of this year so you can take a deduction this year. This includes property taxes and quarterly estimated state income taxes.
If you're self-employed, stock up: This is the time to buy all of the business equipment and supplies you haven't yet purchased. Make sure to mark and save your receipts.
And, you can pay your January 1st mortgage payment on or before December 31st: This allows you to take an additional deduction for interest paid. Remember to add the interest amount to the amount reported by your lender when they send you a 1098 form.
Also, you may be able to defer income: Unless you have reason to believe that next year will bring you a higher income and move you into a higher personal income tax bracket, you may want to defer income until after the first of the year. If you are self-employed, for example, send the last invoices out late in December so you will more likely receive payment in January.
