13 smart year-end tax moves
| | By Kay
Bell • Bankrate.com |
| Have you been too busy to make your list, much
less check it twice? No problem. We've got it right here.
Nah, we're not talking about that reminder sheet for
your holiday shopping. This is your all-important year-end tax to-do
list.
By checking off these 13 items by Dec. 31, you'll
find your tax filing chore next year much easier. Even better, these
year-end moves might net you enough tax savings so that you can
easily pay for most of the gifts on that other list.
| Tax planning can work to your advantage.
You can lower your liability by paying certain expenses
before Dec. 31 and by deferring income until after that
date when possible. |
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| 13 ways to cut
your tax bill |
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1.
Get in the giving mood
Since the holidays are the time for giving, give yourself a tax
gift by making a deductible donation to your favorite charity. As
long as you itemize, you can deduct charitable gifts, which will
reduce your taxable income and lower your tax bill. You have until
Dec. 31 to get the check in the mail or put your pledge on your
credit card.
There are, however, a couple of new tax laws to
pay attention to when you make your charitable gifts. One change will be a perfect
tax gift for some donors as well as recipients. The other, however, will be about
as welcome as a lump of stocking coal for folks accustomed to cleaning out their
closets each December, in the hopes of an IRS reward.
First, the welcome giving news. Individuals age 70½
or older now can transfer money from an IRA directly to an IRS-qualified
charity. New legislation in the Pension Protection Act allows these
older retirement account holders to roll over up to $100,000 in
2006 and 2007 to a qualified charitable organization.
It doesn't matter whether it's a traditional or Roth
IRA, says Shari Levitan, chair of the New England Private Wealth
Services Group for Holland & Knight LLP, in Boston. "A
gift made directly from the plan provider to the charity is tax-free.
In other words, the taxpayer doesn't recognize the income tax. He
doesn't get the deduction either, but that's OK. It's a wash."
Now
for the not-so-good news. Many charities are happy to accept used clothing and
household goods as donations that you can deduct. But this year, thanks to a provision
in the Pension Protection Act that became law on Aug. 17, any items you donate
after that date must be in good or better condition. So no more unloading hole-ridden
socks or moth-eaten sweaters for an easy tax write-off. | 
