Year end – Tax planning
Although the average taxpayer will avoid thinking about income taxes until the approach of April 15-deadline forces him to do so, after the ball drops at One Times Square at midnight on 31 December and part of the new year, there is very little you can do to cut your tax bill.
However, during the last two months of the year you can do a lot to reduce tax liabilities.
Sit with paper and pencil and list your expected income for 2007 and all of your allowable deductions to date. You want to do this, using your 2006 return as a guide, preparation of projected 2007 tax return. Then you can determine what steps to take, make sure you pay the absolute least amount of federal, state and local income taxes for 2007 and 2008. Tax Information for 2007 and 2008 (ie, the standard deduction and personal exemption amounts, tax rates, etc.) is available at that ‘S NEW FOR 2007 and that’ S NEW FOR 2008 pages www.robertdflach.net.
Here are some of the key year-end tax planning tips * traditional year-end planning requires laying aside the taxable income until 2008 and accelerate the allowable deductions be claimed in 2007, the idea is to minimize your 2007 taxable income. This strategy is usually used if you are going to be in the same tax bracket for 2007 and 2008, or he’ll be in the lower bracket in 2008.
If, however, expected a substantial increase in taxable income in 2008 will push you in the higher bracket, you should do the opposite and expedite the receipt of taxable income for 2007 and to defer deductible expenses until 2008. Income received in 2007 will be taxed at lower rates, and deductions claimed in 2008 will bring a greater tax savings.
Not sure what your income will be 2008. Follow the rule of law “when in doubt defer” – go the traditional route and to defer income and accelerate expenses.
* He does not pay to list if not all your allowable deductions exceed the standard deduction that applies to your filing status, as well as any additions for age or blindness. If you have decided to accelerate the allowable deductions claimed in 2007, you can speed all you want, but it is useless unless your overall “itemizable” deductions exceed your standard deduction applicable.
Let’s say you usually do not have enough deductions to enumerate. However, after the preparation of your return projected 2007 you will find that, because of some special circumstances, you will be able to list this year.
