13 smart year-end tax moves
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10. Tend to your retirement
Give yourself a holiday gift of future financial security by starting or adding to retirement savings accounts. In many cases, you get an immediate tax break and begin building a nest egg sooner.

If you're eligible to participate in your company's 401(k) retirement plan and its rules allow you to enroll now, do it. If you're already contributing, think about upping the amount. For 2006, the IRS says you can put in up to $15,000 ($20,000 if you're age 50 or older). The money you contribute reduces your taxable income.

Since it's so late in the tax year, your increased retirement account contributions probably won't help you cut your coming tax bill, but you'll definitely have a head start on reducing next year's taxes.

This strategy also applies if you work for yourself, either full time or as a side business. While you can wait until next year to establish some self-employment retirement plans (for example, a SEP IRA), if you opt for a Keogh or solo 401(k), both of which offer you more generous contribution limits, Dec. 31 is the last day you can set up these plans.

11. Examine education payment options
Sure, you've got a lot of holiday expenses coming due this month, but it might be worthwhile from a tax standpoint to pay a few more things in December, specifically upcoming college costs.

Tuition payments for a term that starts within three months of the end of the year can count toward the Hope or Lifetime Learning credits in the year they are paid. So if your (or a dependent's) college accepts early payment for the 2007 spring semester, it might be a smart 2006 tax-saving move to write that check this month.

"Check with your school," says Bob D. Scharin, senior tax analyst from Thomson Tax & Accounting in New York. "If the term starts Jan. 10, then pay in December if allowed. Or if the school offers an installment plan, see if you can make the coming semester's first payment this month."

However, do your tax-credit homework to ensure that you haven't already spent enough to claim an education credit this year. "If you've already maxed out," says Scharin, "then added payments in 2006 will not produce added tax savings."

Another variable to keep in mind is eligibility income limits. If your 2006 adjusted gross income will be $55,000 or more and you're a single filer (double that amount for married taxpayers filing jointly), you cannot claim either education credit.

"If you're eligible for the credit this year but don't expect to be next year, this is a chance to accelerate payments in 2006," says Scharin. "On the other hand, if you're not eligible this year, but think you will be next year, defer the tuition payment until 2007 when you might be able to use it."

12. Check your withholding
Now is the time to stop giving Uncle Sam free use of a portion of your money. Most of us pay the bulk of our annual tax bill through payroll withholding, and it's important that the amount be as accurate as possible.