|
|
Tax Tips Use up your flex spending plan: If
you have a flexible spending plan, which means you have put aside tax-free earnings to cover medical and dental expenses through
a plan offered by your employer, you need to use it up. Make doctor appointments now and buy necessary medical supplies that
are covered in the plan. 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. 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. 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. Consider
packing your medical bills into one year: If you have large and predictable medical bills,
such as braces for the kids, consider making all the payments before Dec. 31. (The IRS allows families to itemize and deduct
medical and dental expenses that exceed 7.5% of your adjusted gross income.) Consider using a credit card to pay medical expenses
as this counts with the IRS even if the credit card balance is not paid in full. Teachers, take a deduction from your students: You can still take up to
a $250 deduction on materials purchased to make the learning experience better for your students. This deduction is also applicable
for principals and others who are employed in a school. 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.
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. Prepay
your state and/or local taxes: 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. Make
charitable donations: If you have extra cash, donate money to charity or drop off non-cash
donations to charitable organiziations. Save the receipts and use the charitable donations as deductions on your tax return.
These are some of the ways in which you can make appropriate changes to lessen your tax bill. Go Green : Looking for a home improvement project to tackle over the holidays? If you are thinking of making energy
saving improvements to your home like extra insulation or energy saving windows, a credit of up to $500 may be available.
Substantial tax credits are available for installing energy generating equipment (such as solar electric panels or solar hot
water heaters) to your home. If you are thinking of buying a hybrid vehicle eligible for a tax credit, check to see if it's
eligible for the credit, and, if so, purchase it before year-end. The credits expire once a manufacturer has sold over 60,000
units. Cut Your Losses
: Is your portfolio weighed down by a dud? Consider selling that loser.
The good news is that you can use that loss to offset capital gains generated elsewhere in your portfolio. Once that's done,
investors can write it off against up to $3,000 in ordinary income. The fact is that many of us hold on to losing investments
hoping to someday recoup our costs when a better strategy can be to sell at a loss, take the tax break and move on to a better
investment. One word of caution, though. You can't sell your shares, take the deduction, and then buy back the same stock
in a 30-day period. According to the IRS, that would violate "wash sale" rules. You can sell the original holding,
then buy back the same securities at least 31 days later to claim the loss and re-purchase at the new lower price if you believe
the investment will re-bound. A tip for parents: Contribute to
your child's 529 college savings plan. A number of states allow parents to write off contributions up to a certain dollar
amount. Log onto http://www.oregoncollegesavings.com for information about this savings plan. Bunch
your write-offs: Consider extending your subscriptions to professional journals, paying
union or professional dues, enrolling in (and paying tuition for) job-related courses, etc., to bunch into 2008 miscellaneous
itemized deductions subject to the 2%-of-AGI floor.
|