Shaping Up for Tax Season: Tax-Saving Tips for 2007

Tax planning and exercise: two things that instantly makes us want to burrow deeper into our recliners. Although tax planning and exercise may suffer unfairly from the same negative associations, both come with a similar guarantee: The more time you devote to these activities, the better shape you'll be in. Following these proven tax-saving tips, reminders to jog your memory and help you take control of your taxes to get into better financial shape.

Chart Your Baseline Performance

Before the year ends, figure out your likely tax bill using last year's tax return as a guide. This will give you a baseline from which to do year-end planning. By estimating your taxes before December 31, you can also determine whether your tax payments are on target and take actions necessary to avoid an underpayment. Compare what's already been withheld and any estimated tax payments you've made with your expected bill. If you have not withheld a sufficient amount, add to your employee withholding by revising your W4 form or make an estimated tax payment before year-end.

Strategize!

Being financially fit requires that you formulate a strategy. One tactic is to defer income and accelerate deductions. By postponing income to the year 2008 and drawing tax-deductible expenses into 2007, you lower your tax bill this year and gain the use of your money for an extra 12 months. However, if you expect to be subject to a higher tax bracket in 2008, you may want to take the opposite approach-accelerate income and defer deductions.

Defer Income

·              Maximize your 401(k).

·              Give gifts of cash.

·              Set up an employee flexible savings account.

·              Use investment losses to offset your gains.

·              Use the long-term capital gains rate to your advantage.

·              Generate your loss, then repurchase a stock.

·              Do not buy mutual funds at the end of the year.

 Work Those Deductions!

·              Tally your medical expenses.

·              Accelerate itemized deductions not subject to income thresholds.

·              Take advantage of your home deductions.

·              Act charitably.

·              Donate appreciated securities that you've held for more than 12 months.

·              Take advantage of deductions for the self-employed. 

Make the Most of Adjustments

Since your eligibility for a considerable number of tax breaks is dependent upon your AGI-that is, your income minus adjustments-it is to your advantage to make the most of the available adjustments to income so you can lower your AGI.

·              Re-evaluate IRAs.

·              Contribute to a Roth IRA.

·              Consider opening an Education IRA.

·              Open a Keogh.

Do You Qualify for Any of These Credits?

Credits-which you can write off directly against tax-are worth much more than deductions. It pays to see if you qualify

·              Dependent Care Credit.

·              Child Tax Credit.

·              Earned Income Credit.

·              Credit for the Elderly.

·              Lifetime Learning Credit.

·              Hope Scholarship Credit.

 These are just a few of the strategies available for you this year.  If you want more information on the above, please contact us at (208) 734-8662 to schedule a consultation.