10 year-end tax moves to make
4. Focus on fuel efficiency Fuel prices finally edged down as fall arrived, but if you're not convinced they'll stay around $2 a gallon for unleaded gasoline, you might want to consider a fuel-efficient hybrid vehicle. A tax credit also might help you make that automotive choice.
Tax credits, some worth as much as $3,000 depending on the make and model, are available for purchases of assorted hybrid cars. However, the credit phases out for the fuel-efficient vehicles once a carmaker sells 60,000 hybrids.
It's too late to get a tax break on the most popular hybrid, Toyota's Prius, which hit the sales-target cutoff amount years ago. And in a couple of weeks, the same thing will happen to Hondas.
The tax credit for Honda hybrids is still worth up to $525, but the tax break will disappear Jan. 1, 2009. So if you want one of these vehicles as well as a tax benefit, act fast.
The IRS keeps a running list of the eligible vehicles and their available credits (or the elimination of them) on its "Alternative Motor Vehicle Credit" Web page.
5. Examine available extenders Almost every year, Congress reauthorizes some tax breaks that otherwise would have expired. These are known as extenders, and some popular deductions were renewed for 2008. To take full advantage of them, you need to act by Dec. 31.
If you itemize and your state has no income tax, you still can deduct your state and local sales tax amounts. If you haven't kept track of all your sales tax payments this year, don't worry. The IRS provides tables for the state amounts, and a work sheet to help you figure city and county levies. There's also a big plus for car buyers, regardless of whether you go for an environmentally friendly hybrid discussed in ">Year-end Tax Move No. 4 or a gas-guzzling sports car. You can add the sales tax paid on your new wheels to the table deduction amount that the IRS provides. If your motorized needs this year included a boat or airplane, those sales tax charges also can be added to the table amounts.
Another deduction that was given new life was the write-off for teachers and other educators to cover some of the money they spent to buy classroom supplies. The deductible amount is only $250, but the nice thing about it is that there's no need to itemize. You can claim it directly on your Form 1040 or 1040A as long as you buy the school supplies by Dec. 31.
6. Maximize medical expenses Consider getting and paying for elective procedures in 2008 if you are close to or have exceeded the threshold requirement for medical deductions. You can only deduct costs that exceed 7.5 percent of your adjusted gross income. That means, for example, a taxpayer earning $50,000 must accumulate medical costs that exceed $3,750, and only expenditures above that amount are deductible.