Although only a few weeks remain to 2007, there is still time to reduce your obligation to the U.S. Treasury for the current year. Consult a CPA or professional financial advisor if interested in but unsure of any of these, but by April's tax deadline one or more of the following may save you bucks:
- Use a credit card to make an intended December charitable contribution. Chances are the donation will be deductible for 2007, yet the charge might not be due until 2008.
- Also for December, make both that month's and January's mortgage payment. The extra interest portion deduction can likely be applied against this year's taxes.
- Instead of selling them in a garage sale, gather up no longer used but still worthwhile items and donate them before the end of 2007 to a non-profit organization. Get a dated receipt, and be sure to list the item categories on it. These may be deducted at a percentage of their fair market value.
- In time to affect the final wages you receive in 2007, increase your 401k (or other employer sponsored retirement account) contribution up to the maximum, since you are not required to pay taxes on pretax contributions to an employer's retirement savings plan.
- Most of us (though not all, depending on your individual or household taxable income) are eligible to contribute to a traditional IRA (Individual Retirement Account). Open one, if you do not already have such a tax deferred vehicle, and contribute to it up to the maximum limit before April's tax deadline to receive yet more reduction in your 2007 taxes. The contribution limit for the current tax year is substantial: $4000 each per employee or non-working spouse ($5000 if age 50 or older), when filing a joint return, up to $8000 total.
- Misc. itemized deductions or medical expenses, may sometimes be profitably bunched in one year and deferred the next year, or vice versa. Thus, for instance, if a needed surgical procedure may be done in the balance of 2007 instead of put off till 2008, the frequently high costs can often be added to more routine expenses in meeting deduction floor requirements (2% of adjusted gross income for misc. deductions; 7.5% for health related expenses) of the tax law. Do not forget that health insurance premiums that you pay (as opposed to employer paid premiums) count toward this floor too.
- Selling one's losing stocks and mutual funds can sometimes be prudent for tax purposes. If there have been taxable capital gains in other parts of your nest egg, losses in taxable accounts can offset them. Even if one has had few if any such gains, up to $3000 in capital gains losses (either in the current tax year or carried over from an earlier year) may be used to reduce taxable regular income.