Year-end tax tips: as 2006 winds down, here's how to best minimize next year's tax jolt.End the year on the right financial track by making smart money moves before Dec. 31. Here are a few tips to help you lower your tax bill while you keep your portfolio and checkbook intact: Accelerate your mortgage payment. "You might get an extra month's worth of mortgage interest deductions for 2006 by making your January payment in December," says Sidney Kess, an attorney and CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . Put the check in the mail as early as possible so the lender can report it on IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. Form 1098 for 2006. Defer income until 2007. If you're self-employed, defer December billings until January. Expecting a year-end bonus? Ask your employer to give you the check in the new year. Lose your losers. Review your portfolio and sell any stocks, bonds, or mutual funds trading at a loss since you bought them. "Selling losers may be worthwhile for an investment that's gone down $1,000 or more," says Matt Gordon, managing director of financial planning Financial planning Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against for Lenox Advisors in New York. "If your capital losses exceed your gains for the year, [then] net losses up to $3,000 can be deducted on your 2006 tax return." Max out your retirement accounts. Contribute the maximum amount of money allowed to your company-sponsored 401(k) plan or other tax-deferred retirement account. Think you can't afford it? Do the math: the payroll deductions reduce your taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. and may actually increase your take-home pay. Take last-minute deductions. This is the season for giving--especially tax-deductible donations. Consider donating appreciated stock rather than writing a check. For example, say a stock you bought years ago for $200 is now worth $1,000. If you sold that stock, you'd have an $800 long-term capital gain Long-term capital gain A profit on the sale of a security or mutual fund share that has been held for more than one year. and owe $120 to the Ins, at a 15% tax rate. You could instead give the stock to a charity and get a $1,000 tax deduction--and not have to pay anything, Gordon explains. A word to those who tithe tithe Contribution of a tenth of one's income for religious purposes. The practice of tithing was established in the Hebrew scriptures and was adopted by the Western Christian church. or make large cash contributions to a church: A recent tax law change now requires that all tax deductible cash gifts be supported by a bank record or a letter from the charity specifying the date and amount of the donation. Therefore, it's better to drop a check in the collection plate. |
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