bmcper 
CEO/Auditor
Posts: 57
(12/20/00 2:05 am)
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16 Ways To Cut Taxes !!!
Cut your tax bill 16 ways in 17 days
Think it's too late to start tax planning for this year? Try one of these each day, and you may save a bundle in the 17 days left before we roll into the new year.
By Jeff Schnepper
The presidential election has barely ended, and you’re begging for the year to end. Suddenly, you realize you’ve just 17 days until Dec. 31. And that means you’ve just about run out of excuses for putting off that tax planning you’ve been talking about since July.
But what can you do with so little time left? Luckily, there’s LOTS! So, here’s my holiday gift to you: 16 great planning ideas you can use right now that should save you money. And then I offer a reminder and two pieces of advice so you don’t go overboard.
Accelerate expenses -- spend now, save later
If you’re planning to make charitable contributions, write and mail the check now! The critical date is the postmark on the envelope.
If you have appreciated stock you’ve owned for more than a year, contribute the stock. You get to deduct the fair market value, and the gain is never taxed.
If you don’t have stock or cash when you’re ready to make the donation, charge it. Even if you don’t pay the bill until next year, you get the deduction in the year of the charge.
Donate your old clothes, furniture, computers, books and the like. The beauty of this is you don’t have to put out cash. And Salvation Army or Goodwill will be happy to get the goods. Besides, when the holiday giving is all done, you should have new things to wear. You may deduct only the wholesale fair market value of those goods contributed. So, if you’re donating a computer, you have to figure out what it’s worth in the marketplace. You can’t deduct what you paid for it. Make sure you get a receipt for the specific items donated. No receipt means no deduction, if the IRS comes knocking on your door.
Pay estimated state income taxes on Dec. 31. Usually, they’re due in January of next year. If you pay on Dec. 31, you get the deduction now.
Pay your real-estate taxes by Dec. 31. This is a piece of advice I have offered every year. My fourth-quarter 2000 real-estate tax is due on Feb. 1, 2001. I pay it on Dec. 31, 2000 and get the deduction one year earlier.
Make your January 2001 mortgage payment on Dec. 31, 2000. Again, I’m accelerating the deduction into the earlier year. Your bank may not include this final payment on their 1099 because of the way its computers are programmed or because it receives payment in 2001; you may need to run an amortization schedule to report this added month’s interest.
Accelerate your other deductible expenses. Miscellaneous itemized expenses must exceed 2% of your adjusted gross income to be allowed. If you qualify, union dues can be paid and investment publications charged on your credit card. Write a check for your Keogh or IRA fee and mail it before year-end.
Prepay your accountant for your 2000 tax return. Mail the check on Dec. 31 so you get the deduction this year, but your accountant gets the income in 2001. If you’re not sure of the amount, overestimate. You’ll get the full deduction this year and include the difference in income next year -- or take it as a credit for the preparation of your 2001 return.
Prepay your kids’ orthodontia costs or your elective surgery or other medical expenses. Medical expenses are allowed to the extent they exceed 7.5% of your adjusted gross income. If you qualify here, accelerate any medical payments.
Max out your qualified retirement contributions by Dec. 31. It doesn’t matter if you’re talking about a Keogh or an IRA. The earlier you invest, the greater the benefit you get from the tax deferral. A note: You must set up a Keogh by December 31, but you don’t have to fund this year’s contribution until you file your return. With extensions, that could mean as late as next October. You must contribute to an IRA before April 16. But the point still is: why wait to put your money to work?
Defer income -- or don’t get it until next year
Enter into a binding agreement with your boss to have your 2000 bonus paid in January 2001. As long as the agreement is before the bonus is “constructively received,” you’ve deferred the taxation until April 2002!
If you’re self-employed, defer billing until late December. You operate on a cash basis with the Internal Revenue Service. If someone owes you money now but you don’t get a check until 2001, it’s not taxable income for 2000.
Investment strategies
If you had capital gains, offset them with any capital losses. I know it’s been a rocky year for the stock market, and you don’t want to think about the beating you took. But the beating creates a tax opportunity. Capital losses offset capital gains on a dollar-for-dollar basis.
Sell losing stocks if you wouldn’t buy them even at today’s prices. Net capital losses can offset as much as $3,000 in ordinary income each year. Excess losses are carried forward into the next year.
If you have potential losses, but like the company, sell the shares and buy them back after 30 days. The wash sale rules disallow any losses from the sale of stock if substantially identical stock has been bought within 30 days of the sale.
For those who really care about their taxes
Get married! Assuming that you were planning to get married anyway, if your potential spouse doesn’t work, you can save substantial dollars by getting married before the end of the year. If you’re in a high tax bracket, this technique can actually save you enough on taxes to pay for the honeymoon. For example, if you’re single with a taxable income this year of $132,600, you pay $35,788 in federal tax. But if you are married and file a joint return, your tax on the same income would only be $32,227.50. Your tax savings: $3,560.50! But you really have to be concerned about your taxes to appreciate this idea.
A quick reminder
Use up any balances in your in your salary reduction (or "cafeteria") plan. These are “use-them-or-lose-them” dollars. Get new glasses, or, if you want to go all the way, laser eye surgery to correct your vision. Prepay for child care, or get your end-of-year checkup. But spend those dollars!
And now, two pieces of advice
Make a realistic guess about your 2001 income. I made these tax-saving suggestions assuming that your income won’t be substantially higher next year. If an increase in income puts you in a higher bracket next year, you might consider reversing the moves -- accelerating income into this year’s lower bracket, and deferring expenses until next year, when they give you a bigger bang for the buck.
Watch out for the Alternative Minimum Tax (AMT). That’s a flat 26% to 28% tax on an augmented income, less a decreasing exclusion. If you’re subject to the AMT, your deductions are allowed at the 26%-28% rate regardless of your actual marginal tax bracket. Some deductions, called tax preferences, may actually increase your net tax. Tax preferences include such items as state income taxes and real-estate taxes paid. I don’t want to turn this into a column on AMT planning, but I will offer this little gift for the holiday: If you’re subject to the AMT, some of the tax planning I described above may be inappropriate for you and could cost you money.
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