Uncle Sam is Coming to Dinner - Plan Ahead and Enjoy the Holidays
November 30, 2007
Gina M. Barry, Esq.
It's that time of year again! Most everyone is preparing for the holidays and time is at a premium. Still, the savvy taxpayer will make room in their overstuffed holiday calendar to complete year end tax planning. Planning after January 1st is not an option unless, of course, you are planning for the following tax year. Year end tax planning should be completed at least one month before the end of the year so that all tax issues are properly addressed and tax liability is minimized.
If your taxable income needs to be offset, you should consider selling assets that have lost value before the end of the year. Losses will offset gains, and to the extent that the losses are greater than the gains, you may be able to write off the losses against your income this year and in future years. If you are holding an asset that in all likelihood will not go up in value, consider a sale at a loss, which may, in turn, reduce taxable income.
Often, taxpayers borrow additional funds or make additional charitable contributions in order to obtain additional write-offs against their income. An additional write-off is only available if you qualify to itemize deductions. In order to itemize your deductions, you must have deductions that exceed the standard deduction for the tax year. If you are unsure whether your deductions exceed, or will exceed, the standard deduction after making additional contributions, it makes sense to calculate your deductions prior to making any additional contributions to ensure that the contributions will have the desired effect on your income tax return. Similarly, if you are considering refinancing your mortgage, and if you are paying points, consider whether you should close on December 31st or January 2nd in order to determine the most beneficial year for taking the itemized deduction of these points.
Gifting should also be considered. In 2007, you may gift $12,000 to any person without having to file a gift tax return. ...
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by: Gina M. Barry
Prime
December 2007
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