As the end of the calendar year approaches, take some time to focus on potential tax savings.Here are several ideas to implement before December 31st to lower your 2008 tax liability:
1)Review your income, expenses and potential deductions:Before you can make any adjustments you will need to look closely at how much you will be earning for the year, spending, and saving and what you can deduct.Call us or check the website for a self-employed income and expense organizer and an itemized deductions organizer.
2)Review your investment portfolio:If capital gains are high, consider taking a loss to offset some of those capital gains.Call your investment advisor to determine your current potential gains and losses.
3)Be careful about buying an actively managed mutual fund: The later it gets in the year, the more likely you will pick up the year-end capital gains distributions on a mutual fund.Check the distribution schedule and if it’s late in the year, wait before buying the fund.
4)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.
5)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.
6)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.
7)Teachers, take a deduction from your students:You can still take up to $250.00 deduction on materials purchased to make the learning experience better for your students.This deduction is also applicable for principals and other school personnel.If you’re not sure if this deduction applies to you contact Tax Plus.
8)If you are self-employed, stock up:This is the time to buy all of the business equipment and supplies that are critical to your business.Make sure to mark and save your receipts.
9)Prepay your state and/or local taxes:If you do not 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.
10)Make charitable donations:If you have extra cash, donate money to charity.Save the receipts, and use the charitable donations as deductions on your tax return.Make sure you are able to itemize before donating as a tax saving strategy.
11)Maximize your retirement plans:You still have time to maximize your voluntary contributions to retirement plans such as 401(k)s and 403(b)s. Remember that these plan contributions must be made by Dec. 31st.
Call us to evaluate your personal year-end tax planning!
