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It may or may not be snowing, but political change is blowing.
While Santa on his sleigh may rejoice with eight reindeer (nine if you count Rudolph), given more choice,
we just pray for someone brainier. Happy holidays and lots of cheer, welcome to
the end of the year. With hope that 2008 turns out to be great or at least as
nice, here's our list of advice, so get out your axes and let's chop some taxes.
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| 8 wise tax moves for '08 | |
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| 1.
Think capital gains in 2008. In 2008 through 2010, the long-term capital
gains and qualified dividends tax goes to zero if your taxable income is in the
15 percent tax bracket. The 15 percent tax bracket is approximately $65,000 for
a married couple filing jointly and half that for single taxpayers. If you're
planning on selling stock or property, this break is for you if you can get your
income under these limits.
Remember the break applies to
corporate dividends as well. While you may not have control over when Microsoft
declares a dividend, if you have your own corporation, this tax break may help
you and other shareholders. Through proper planning between now and 2010, you may
be able to rid the corporation of excess earnings accumulations at little or no
additional tax cost.
2.
Remember to use your flexible spending accounts. You have to use your 2007
salary deferrals to prevent forfeiture. Last year the rules were changed so that
you have until March 15 of the following year to spend your 2007 FSA money. While
over-the-counter, or OTC, products are not deductible for tax purposes and your health
insurance plan doesn't reimburse these, many of these items can be paid or reimbursed
from an FSA. Some OTC products make wonderful Valentine's Day gifts. Now is also
the time many employers allow you to set your 2008 salary deferrals. Make a budget
and target the correct tax-free savings.
3. Watch out for the bite of AMT. Alternative minimum
tax may be an issue for more taxpayers when completing their 2007 individual returns.
In 2006, the AMT exemption amounts were $42,500 for single individuals and $62,550
for married couples filing jointly. For most taxpayers with around $100,000 in
income, these exemptions meant they stayed out of AMT.
There is currently a bill in Congress
to maintain the same exemption amounts for another
year, and it is awaiting President Bush's signature.
Most average folks fall into the AMT inadvertently
through too many tax and miscellaneous itemized
deductions. The IRS has already warned Congress
that further delay in making these changes could
cause a disruption in 2008 tax filings as they
reprogram computers. Either more people will pay
AMT or delay tax filings.
4. Hang in there until 2010. While death and taxes
are inevitable, in 2010 you still may cheat taxes. If you can hang on until 2010,
the estate tax is repealed. This means that the value of your assets will escape
taxation in 2010 if Congress doesn't act before then. From now through the end
of 2008, the first $2,000,000 in assets passes tax-free to your heirs.
In 2009, when our next president
is sworn in, the exemption goes to $3,500,000.
All of us tax pundits are assuming that something
will be done, but we've been assuming that since
this gradual estate tax repeal was introduced
some six years ago. All this makes planning difficult,
so if you're dealing with numbers in this ball
park, stick close to your attorney, your accountant
and God.
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