Eleven Year-End Tax Saving Strategies – Act Before December 31!
National Association of Tax Professionals (NATP) Appleton, WI – As we approach year-end, our
minds are wrapped up in upcoming holidays. While holiday celebrations are much more pleasant to
think about, we also need to think of paying taxes. If you act before year-end, there are still some
things you can do to bring down that tax bill for 2006, especially if you are itemizing. But you must
act quickly, as January 1 begins a new year and in most cases, your opportunities will be gone.
Here are some common ways to save if you act before December 31, 2006:
“You may be in the alternative minimum tax for 2006 because you already have a substantial
amount of these expenses and deductions,” states NATP member, Anthony J. Manziano, CPA, of
Woodbridge, New Jersey. “In this instance, the tax benefit for the above noted additional expenses
and deductions are a maximum 28%. You should try to determine whether or not you will be in the
alternative minimum tax again for 2007. If not, then deferring payment of above expenses and
deductions until January 2007 may provide a higher tax benefit if your regular tax rate is expected
to be higher than 28%.”
National Association of Tax Professionals (NATP) Appleton, WI – As we approach year-end, our
minds are wrapped up in upcoming holidays. While holiday celebrations are much more pleasant to
think about, we also need to think of paying taxes. If you act before year-end, there are still some
things you can do to bring down that tax bill for 2006, especially if you are itemizing. But you must
act quickly, as January 1 begins a new year and in most cases, your opportunities will be gone.
Here are some common ways to save if you act before December 31, 2006:
- Make an extra mortgage payment before the year is up. The interest you pay is added to
your other mortgage interest. - Give unused items to charity and deduct up to the fair market value. Receipts are needed
for all items. - Contributions of household items made after August 17, 2006, are not deductible unless
they are in good or better condition. If the value of a single item is over $500 you must have
a qualified appraisal. - Have you traveled in connection with charity work? Mileage is deductible at a rate of 14
cents per mile. (You must have kept records of charitable purpose, dates, places, and
miles). The value of your services is not deductible. - Use your full pre-tax medical reimbursement funds that were deducted from your salary. If
you don’t use them, you lose them. Spend what’s left for 2006 to stock the medicine cabinet
or buy new glasses. While you’re at it, ensure that you have your pre-tax amounts set with
your employer for 2007. - Don’t forget to pay those doctor and dentist bills before year-end if you have enough
medical expenses to be able to benefit by using these as an itemized deduction (i.e. paid
medical expenses must be greater than 7.5% of your AGI to qualify for a deduction.) (TIP: If
funds are short, you can charge to a credit card in 2006 and pay it off in 2007.) - If eligible, contribute to your IRA (you have until April 16, 2007, to do this one, but don’t
forget!). You can also contribute as much as $5,000 to the account of a nonworking spouse
over age 50, or $4,000 if under age 50. - If eligible, set up a Keogh plan by year-end. You have until the tax filing deadline to actually
contribute. - Pay your property taxes by year-end.
- If you are paying college tuition, pay for the spring semester before December 31.
- If you are self-employed, stock up on business supplies before year-end. Save your receipts
and take the deduction this year.
“You may be in the alternative minimum tax for 2006 because you already have a substantial
amount of these expenses and deductions,” states NATP member, Anthony J. Manziano, CPA, of
Woodbridge, New Jersey. “In this instance, the tax benefit for the above noted additional expenses
and deductions are a maximum 28%. You should try to determine whether or not you will be in the
alternative minimum tax again for 2007. If not, then deferring payment of above expenses and
deductions until January 2007 may provide a higher tax benefit if your regular tax rate is expected
to be higher than 28%.”
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