10 smart year-end tax moves |
| By Kay Bell
• Bankrate.com |
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It's time to play Santa again. This year, put yourself at the top of the tax gift list with these critical year-end moves.
Sure, you're busy right now, but by making some time
for taxes before Dec. 31, you'll give yourself a gift that will
pay off next year, too, when you file your Form 1040.
Many of the tactics are holiday tax perennials. A
few are set to expire at year's end, and all could definitely bring
you some much needed holiday and financial cheer.
1. Get in the giving mood
A gift to your favorite charity in December can produce happy tax returns, too. As long as you itemize, you can deduct your donations; this will reduce your taxable income and lower your tax bill.
You have until Dec. 31 to get the check in the mail. You also can put your pledge on your credit card by year's end. Using plastic also could help out holiday money management. Your charged donation will count for 2007 tax purposes, but you won't have to pay the bill until next year.
A few other points to remember in this end-of-year giving rush:
- Make sure the nonprofit has IRS approval. The agency keeps track in
Publication 78, which you can search online.
- Get substantiation for your gift. It the IRS ever questions your claim, you must be able to produce a receipt or record
(canceled check or charge card statement) verifying your donation of any amount, not just those of $250 or more.
- If you donate household goods, they must be in good or better condition or the IRS could later disallow the claim.
- Auto donations have special deduction rules, depending upon how the charity uses the vehicle. You should get a statement from the
nonprofit detailing its plans for the vehicle and how much you can deduct.
You can also donate an asset that's appreciated in
value but no longer fits your investment plan. As long as you've
owned the asset for more than a year, the charity gets to use as
it as needed and you get to deduct the asset's value with no capital
gains taxes to worry about.
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| 10 year-end tax moves that could cut your 2007 tax bill
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| By adding these tax tasks to your holiday to-do list, you could give yourself a nice present when you file your 1040 next year. |
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Older philanthropists also have another option this December. Individuals age 70½ or older can transfer money, up to $100,000 for the 2007 tax year, from an IRA directly to an IRS-qualified charity. By using this approach, an eligible contributor can avoid taxes that normally would be collected on required minimum distributions from the IRA. Unless Congress acts in the next few weeks, this could be the last year that this donation method is available.
2. Assess your assets
Investors typically reassess their portfolios at the end of the year. Some, as discussed earlier, choose to donate appreciated assets. But others are looking to dump disappointing stocks, especially since an asset that has declined in value also offers tax advantages.
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