Tax
Tips - 2007
Here are fifteen
simple
things you can do before the end of the year to keep your income taxes
as low as possible.
Boost
Your Tax Deductions
1. Make
an extra mortgage payment. The extra interest you pay will be
added to this year's mortgage interest by your lender, boosting your
itemized deductions.
2. Pay
your property taxes. Real estate taxes
are tax deductible. If your property tax bill is due in early 2008, you
might want to pay it now and take the deduction.
3. Donate
to charity. It pays to be
charitable, especially at the end of the year. Donating cash is always
a good idea. You can also donate household goods, clothing, and other
items. Under the new Pension
Protection Act,
you will need a written receipt for all charitable donations (or
canceled checks in some cases), and
donated items must be in good condition. You can also deduct
the cost of driving for charity at 14 cents per mile. You cannot take a
deduction, however, for the value of your time or services when
volunteering.
4. Pay
doctor bills, insurance premiums, buy
eyeglasses, or stock up on prescription medications. You can take a
deduction for medical expenses exceeding 7.5% of your adjusted gross
income.
5. Boost
business expenses. Business owners
and independent contractors can buy office supplies, invest in new
equipment, or pay bonuses to their employees. They should also review
their retirement plans or decide about setting up a retirement plan.
Many retirement plans need to be established by the end of the year if
owners want to make tax deductible contributions for 2007.
6. Organize
your financial records. Good
record keeping can really pay off at tax time. Not only will it make
your tax preparation easier and faster, but you might uncover enough
tax deductions to be able to itemize. More importantly, the IRS will
require receipts and other records in the event of an audit.
7. Sell
losing investments to offset capital gains.
Investors can lower their
capital gains taxes by selling securities
that have lost money. Losses offset gains dollar for dollar, and losses
in excess of your gains can be deducted, up to $3,000 per year.
8. Wait
to invest until after the ex-dividend date.
Avoid buying mutual funds held in taxable accounts until after their
ex-dividend date. You'll avoid paying capital gains tax on the
dividend.
9. Max
out your retirement savings. Contributions to a retirement
plan reduce your taxable income.
10.
Make the most of your Flexible Spending Account.
You should use up any funds in your Flexible Spending Accounts, or risk
losing that money forever. Use your FSA funds to buy eyeglasses,
medications, or get a checkup.
11.
Open or contribute to a Health Savings Account (HSA).
Health Savings Accounts (HSAs) were signed into law by President George
W. Bush on December 8, 2003. Health
Savings Accounts will change the way millions meet their health care
needs because they are designed to help individuals save for qualified
medical and retiree health expenses on a tax-advantaged basis..
12.
Avoid the gift tax by giving $12,000 or
less per year per person. Gifts over that amount will reduce your
lifetime gift tax exclusion, and gifts over the exclusion will be taxed
to the giver. (Giving is a tax strategy used by taxpayers who are
facing a potential estate tax bill and need to remove assets from their
taxable estate. Taxpayers should be working closely with an experienced
tax professional on estate and gift tax issues.)
13.
Keep a mileage log and a record
of actual business expenses. If you're self employed or an
employee with unreimbursed employee business expenses such as mileage,
and travel expenses.
14. Estimate
your taxes. Make sure you calculate and withhold enough taxes
during the year. If you need help with this calculation,
please call our office. We're here to assist you with tax or accounting
questions.
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