Posted by Dave Lorenzo - Business Coach

Here are some year-end tax tips from the New York State Society of Certified Public Accountants and other tax experts:

Max out on your retirement plan. Each year the IRS allows you to put a certain amount of money into your 401(k) plan. This year, that amount is $15,000 for someone under 50 and $20,000 for anyone over 50. In the case of an IRA, the amount is $4,000 for those under 50 and $5,000 for people over 50. If you can live without that money, put it into your retirement account. The deadline is the end of the year for a 401(k) plan and April 15 of the following year for an IRA.

Do a tax projection that will see if you are subject to the Alternative Minimum Tax. You will then know if you should accelerate your deductions or defer them.

Review your income and deductions. The most fundamental year-end tax move is to adjust the timing of income and deductions. If your income is high, putting off receiving more income at the end of the year can save taxes. For example, if you’re close to the line on itemizing deductions, accelerating payment of deductible expenses such as job hunting costs or professional dues might save on taxes.

Postpone income. If you are in line for a bonus, see if your employer will hold off writing the check until January. If you own a cash-basis business, you can time receipt of income by waiting until the end of the year to send your December billings. But remember, you can’t defer taxes by simply not depositing a check.

Get charitable. Donating clothing and household goods to charities before Jan. 1 is not just a good deed, it’s also deductible on your 2006 return. Be sure to get a receipt from the organization you’re donating to. Keep in mind that the deduction is limited to the items’ current fair market value, H&R Block advises.

Offset capital gains. Review your investment portfolio to determine whether you should sell some losers before the end of the year in order to offset capital gains you’ve already realized.
Capital losses are limited to $3,000 a year.

From the New York Daily News.

Filed under: Entrepreneurship - Success
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