| Countdown time is here again, with reminders | | | | 3. Make Charitable Contributions |
| everywhere pointing out how many days are left until | | | | You can donate property as well as money to a |
| the New Year. While you're marking your calendar for | | | | charity. A deduction is usually available for the fair |
| the holidays, remember that countdown time is great | | | | market value of the property. However, for certain |
| for tax planning, too. | | | | property, the deduction is limited to your cost basis. |
| The strategy you can use to reduce your 2007 tax bill | | | | While you can also donate your services to charity, |
| is to deferring income and accelerate deductions. | | | | you may not deduct the value of these services. You |
| Deferring Income | | | | may also be able to deduct charity-related travel |
| 1. If you are planning on selling an investment on which | | | | expenses and some out-of-pocket expenses. |
| you have a gain, it may be best to wait until after the | | | | 4. Investment Gains And Losses |
| end of the year to defer payment of the taxes for | | | | Minimize taxes on investments by judicious matching |
| another year; | | | | of gains and losses. Where appropriate, try to avoid |
| 2. If you are due a bonus at year-end, you may be | | | | short-term gains, which are usually taxed at a much |
| able to defer receipt of these funds until January. This | | | | higher rate (up to 35%) than long-term gains (15% or |
| can defer the payment of taxes (other than the | | | | lower). You might consider, where feasible, trying to |
| employment taxes withheld) for another year. Deferral | | | | reduce all capital gains and generate a capital losses |
| of tax generally won't work where the bonus is | | | | up to $3,000. |
| contractually due in 2007. Negotiate the receipt date to | | | | The maximum long-term capital gains rate is currently |
| be January 1 or later; | | | | 15%. This is set to rise to 20% in 2011. Many believe |
| 3. If your company grants stock options, it may be | | | | this increase could come about sooner with a change |
| wise to wait until next year to exercise the option or | | | | in administration in 2009. |
| sell stock acquired by exercise of an option. Exercise | | | | Note: capital gain rate starts at Zero in 2008. From |
| of the option is often but not always a taxable event; | | | | 2008 through 2010, if your taxable income falls within |
| sale of the stock is almost always a taxable event; | | | | the 10% or 15% brackets, the rate you'll pay on your |
| 4. If you are self employed, and can afford the delay in | | | | federal return for certain dividends and long-term |
| cash inflow, defer sending invoices or bills to clients. If | | | | capital gains will be zero. |
| your business is cash basis, you can send invoices in | | | | The zero tax rate generally applies to gains on sales |
| late December so you receive the cash after | | | | of assets such as stocks, bonds, and mutual funds |
| December 31. If your business is accrual basis, send | | | | that you owned longer than a year. Qualified dividends, |
| invoices after December 31. | | | | which include dividends on most US stocks, are also |
| Accelerating Deductions | | | | eligible. |
| 1. Pay your entire property tax bill, including installments | | | | Though the zero percent tax break becomes |
| due in year 2008 by year-end; | | | | effective January 1, 2008, you can start planning now. |
| 2. 2007 year end purchases to consider: | | | | For instance, it may be beneficial to wait until 2008 to |
| Hybrid Vehicles | | | | sell appreciated stocks. |
| The Energy Policy Act of 2005 replaced the clean-fuel | | | | Some of the tax deductions mentioned above are not |
| burning deduction with a tax credit. A tax credit is | | | | deductible for alternative minimum tax. If this applies to |
| subtracted directly from the total amount of federal | | | | you, a different tax strategy may be required. Consult |
| tax owed. The credit is only available to the original | | | | your CPA for the specific tax strategy to minimize |
| purchaser of a new, qualifying vehicle. | | | | your tax. Also, consider the tax impact of 2007 and |
| Home Improvements | | | | 2008 tax years together. It may be best to pay more |
| Tax credits are available for certain types of home | | | | tax for 2007 if you expect to be in a higher tax |
| improvements including adding insulation, replacement | | | | bracket in 2008. Again, consult your CPA for the best |
| windows, and certain high efficiency heating, hot water | | | | tax strategy. December is always a good month to |
| heaters and central air conditioning systems. The | | | | see your CPA. |
| maximum amount of homeowner credit for all | | | | I published a previous article on year end tax planning. |
| improvements combined is $500 during the two year | | | | See Year End Tax Planning for additional ideas. So |
| period of the tax credit. This tax credit applies to | | | | much has changed in the tax code with expiring tax |
| improvements made to your primary residence from | | | | provisions and new tax provisions, that an update for |
| January 1, 2006 through December 31, 2007. | | | | 2007 was required. |