13 smart year-end tax moves
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8. Make early miscellaneous payments
By now you've probably realized that with many tax issues, timing is everything. That's certainly the case with miscellaneous deductions that could help you cut your tax bill.

As with medical expenses, miscellaneous costs, such as union or professional dues, job-related educational expenses and subscriptions to business publications, must meet a percentage of your adjusted income to count. In this case, it's 2 percent. If you're near the threshold this December, prepay some of these expenses. Buy the uniform you were going to get in January, extend your business-journal subscription another year or pay the registration fee for that job-related computer class you plan to take in February.

By bunching your miscellaneous expenses and paying them early, you could amass a large enough amount to deduct. If you're a bit strapped for cash to make so many early payments, consider paying them by credit card. You'll still get the potential 2006 tax deduction, but won't have to pay until next year when the bill arrives. Just make sure you can pay off your credit card account in full so that you don't face the added cost of interest charges.

The same approach also applies to some taxes you might owe, such as estimated income taxes you pay in installments to your state treasury. By making the final quarterly payment in December instead of the January due date, you shift the tax benefit into this year.

A word -- actually, three words -- of warning about shifting some payments: alternative minimum tax. This parallel tax system was devised more than 30 years ago to guarantee that wealthy filers paid their fair share to the IRS. But nowadays, more middle-class filers are finding the AMT applies to them, in large part because the alternate system isn't designed to keep up with some inflation.

Under the AMT, some usually acceptable tax deductions, such as state and local income taxes, as well as real estate and personal property taxes and miscellaneous write-offs, aren't allowed. So before you shift any deductible payments into another tax year, make sure you won't face an AMT bill which will negate their benefit.

9. Shift incoming income
Paying your credit card bill next year might be easier if you are expecting a year-end commission or holiday bonus, but you might want to have it deferred until 2007.

Why would anyone delay getting extra income? It could be a good idea if the added money would bump you into a higher tax bracket this filing year or you're sure you'll be in a lower tax bracket next year. In these cases, if you can afford to wait a few weeks for the cash, talk to your employer soon about the logistics of postponing the payment until early next year.

Deferring income is a bit easier if you have your own business, either as your main source of income or as a supplement to your salaried job. In this case, if your December cash flow is fine, send out your final 2006 invoices in early January. Look at it as a holiday gift to yourself, to reduce your taxable income, and as a gift to your customers, who'll have one less bill to pay this month.