General Tax Tips
Source: Time Warner Money Center
- Live energy efficient The
government is keen towards those who build green. If you're
going to make your home more energy efficient within the
next two years, you can get up to $500 in tax credits. If
you're going to build a home that uses 50 percent less in
heating and cooling costs than other homes, you can get up
to $2,000 in tax credits if it is completed after August 8,
2005.
- Do a tax projection The
Alternative Minimum Tax (AMT), that vestige of the tax
system passed in 1970, was meant to target only high income
individuals who were subject to many exemptions. But as
incomes rise, the Congressional Budget Office estimates that
soon one in five taxpayers will be forced to pay it. To
figure out if you'll be hit, do a full tax projection and
you'll be able to see whether you should pick up the pace of
deductions - or defer them.
- Figure out your income and
deductions The most basic year-end move is to adjust the
timing of income and deductions, says the NYSSCPA. If your
income is expected to come in high, you can delay some of it
until the next calendar year to save taxes. You can also
accelerate payment of deductible expenses like job hunting
costs or dues of professional organizations.
- Postpone that bonus If you know
you've got a bonus coming, look into having your boss
postpone the big check until January. You can't defer the
bonus being taxed by simply not depositing the check until
later. The NYSSCPA says if you expect you're going to be
forced to pay the AMT this year, consider accelerating the
current year's income to mitigate the negative aspects of
the tax.
- Sock away some for retirement A
great way to put money away for the future is a deductible
Individual Retirement Account (IRA). A conventional IRA will
defer taxes as your investments grow, while a Roth IRA is
actually tax-free. You have until April 15 to open an IRA
and make a deductible contribution for the prior year. And
if you have a 401K plan at work, put in as much as you're
allowed to.
- Pay off those deductible expenses
before year's end If you pay off your state taxes or
property taxes early, that accelerates your federal
deductions. You can make an extra mortgage payment (the
interest is deductible), or go for that dental work or
surgery before year's end.
- Give it to charity If you give
cash to a charity, you can deduct it for the current year.
If you give property, you are usually allowed to deduct the
full market value. For more expensive donations, look into
getting an appraisal to determine the fair value of your
property.
