Year-End Tax Tips

MoneyWatch for December 2006
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Be sure to watch Nightly Business Report on WVIZ during the Dec. 4, 5, and 6 broadcasts for a special series on year-end tax tips.

The holidays are upon us and thinking about taxes is probably not your number one priority. But it’s really not too late to take advantage of opportunities to reduce your 2006 taxes by December 31. A few helpful hints could make a difference.

According to Jeanette Warren, from CPA Articles, “As you manage your taxes at year-end, one important, constant goal should be to reduce your adjusted gross income (AGI), which equals your gross income (salary, investment earnings, etc.) less your allowable deductions and exemptions.”

Below are just a few of the many year-end tax tips that can help you in April.

Year-End Tax Planning Tips:

Contribute to Your Favorite Charity(s): Your charity will be able to assist you with this transaction, and it can really be a great deal for all involved.
Use Your Credit Card: Certainly you want to avoid unnecessary bills, but if you have year-end deductible expenses (such as business expenses, medical expenses, miscellaneous itemized deductions, etc.), you can use your credit card to make the purchase this year, take the deduction this year, and pay your credit card bill next year.
Convert Ordinary Income into Long-term Capital Gain Income: This can be done by simply selling stock that you’ve held for more than one year.
Prepay Your State and/or Local Taxes: If you believe that your tax bracket next year will be no higher than this year, and you won’t be bothered by any alternative minimum tax issues, consider making those state/local tax payments before the end of this year.

Resource: Roy Lewis (TMF Taxes)

It pays to learn about your options. Below are several resources that can help you make tax day a little easier.

State and Local Resources

Quicken: Top Ten Year-End Tips
Financial Fitness Ohio: Don’t Let the “Nanny Tax” Catch You Misbehaving
The Ohio Society of CPA’s: Year End Planning Tips
The Ohio Society of CPA’s: Tax Tips to Military Personnel

National Resources

Access My Library: Year-End Giving That Reduce Your Taxes
The Boston Globe: 10 Ways to Cut Your Taxes and Avoid Traps By Year End
Investopedia: Money Saving Year-End Tips
Internal Revenue Services: Tax Information for Individuals and Businesses

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Research assistance for MoneyWatch is from Cleveland State University Nance College of Business Administration. Information on the Nance MBD program is available here.