Archive
Subscribe
Weather
 |
|
 |
|
You and Your Money: Tips to get an early jump on your 2007 taxes
could save you money |
Most of us would rather not think about next year’s taxes — it’s an
exhaustion that comes from the suspicion of paying too much or
wondering if we’ve missed deductions that could have saved us money
this year. Yet one good way to avoid that overtaxed feeling is to
get a jump on planning for Tax Year 2007.
Here are a few smart tax moves you can put on your calendar now:
Consider planning software: If your tax filing system consists of
shoeboxes and shopping bags, it might be time to move your finances
to your computer. You still need to save key receipts and documents,
but uploading spending, savings and investment information into a
program like Quicken or Microsoft Money (whichever is easier for you
to use), will not only give you a clearer idea of your money picture
from day to day, but it will make your tax filing process much
easier for your tax professional or if you do it yourself.
Another tip: Consider working with your tax professional in setting
up your new software so you have spending, investing and savings
categories labeled correctly. It’ll make next year’s taxes go much
smoother.
Review your 2006 return: Look at your deductions and credits for
2006 and consider those instances in which you may benefit in 2007
by bunching expenses in order to qualify or increase the deduction
or credit amount. For example, medical expenses are deductible once
they exceed 7.5 percent of your adjusted gross income (AGI). Other
expenses have their own limits. Consider if it makes sense to bunch
your expenses in 2007 or 2008 to qualify for a certain deduction or
credit.
Adjust your tax withholding: If you will be receiving a sizable tax
refund from 2006 consider increasing your number of exemptions (Form
W-4) so that less money is taken out of your paycheck each week and
more goes into your pocket.
Rethink charity: Don’t stop giving — just do it smarter. If your
preference is to give cash to charities, make a plan in advance
which organizations you’d like to donate to by year-end so you have
a defined amount in mind for each. For taxpayers with significant
cash or highly appreciated assets to give away, it might be worth
discussing the use of tools like a donor-advised fund rather than
starting a foundation or giving those assets away piecemeal. Such
funds are set up by investment companies and community foundations
as public charities and can house the assets of many individuals and
families under that designation.
Fund your IRAs and other independent retirement accounts on a
year-round schedule: One of the major reasons that people fail to
take the full advantage of the retirement accounts they manage
themselves is that they wait until the last minute to deposit funds
and fall short of their maximum contribution. Take a look at your
overall financial responsibilities and see if there’s a way to put a
little more in these accounts a little at a time. For example, sign
up for automatic deposits so the money is automatically taken out of
your checking or savings account.
Watch that AMT: It’s become the scary “what if” that many
two-income families now worry about — what if you suddenly become
subject to the alternative minimum tax? This tax — an additional tax
structure intended for the wealthy but affecting more taxpayers by
the year — is triggered by a variety of factors, including the
deductions you take in a given year. There’s no general set of
factors that qualify you for the AMT — it depends on your individual
situation.
Talk to your tax adviser now about your risk factors for getting
hit with the AMT in 2007. The Internal Revenue Service has an online
AMT assistant for do-it-yourselfers that can help anybody project
their risk of the AMT.
Make a goal to harvest investment losses: It’s wise to talk to your
tax or investment advisers first about this, but keep an eye on your
portfolio for stocks and other investments experiencing losses
against those investments you plan to sell at a profit. It’ll
minimize your tax hit in 2007.
This column is produced by the Financial
Planning Association. |
|
From
May 16, 2007,
Newberg Graphic
Click Here to Subscribe |
|
|
|
 |
|
