Tuesday, December 02, 2008

Year End Tax Planning

December always brings its share of stresses along with the enjoyment of the holiday season. This year has not been a banner year for many families so the holidays may not be as much fun as in previous years.

Year end also deserves a close look for tax planning. Even though taxes are due in April, whatever balancing doesn’t get done in December sets the tax consequences for the previous year.

Here are just a few things to consider:

If you had gains should you look to sell assets at a loss to minimize the taxes? If it is stocks, you can always buy the loser shares back after 30 days if you feel they will go up in value again soon.
If you had losses, should you look to sell something you’ve been putting off at a gain? This year watch for exceptions to withdrawal from retirement accounts that may pass Congress at the last minute.
If you had gains, can you add extra to existing retirement accounts or open new ones to reduce your income?
If you are planning to gift children or grandchildren make sure you take advantage of the 12K yearly exemption per person to the gift tax limits.
Be aware if you own mutual funds outside of a retirement account that you may get a distribution which is taxable even if you still own the funds. Be sure you have the extra money to pay the tax bill.
If you are a business owner with extra income consider purchasing equipment which can be depreciated at an accelerated rate.
If you are self employed, consider deferring income into the next tax year if possible.
High income earners, watch out for the AMT tax trap. Have a tax professional do a quick computation to see if this will catch you before it’s too late to do something about it.

I know this may not be at the top of your list for fun things to do, but it’s better to spend some time now than be surprised in April when it’s too late.

Paula Straub
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