Save Money With These Important Year-End Tax Planning Strategies For Small Businesses and Individuals
Earlier this month, I discussed financial planning and tax strategies for alleviating potential IRS tax increases on Financial Lifeline Radio with Dave Harbison and John March.
For 2008 tax planning, the most important thing to do is income and deduction management. That is, try and shift as much income as you can into 2009. Now if you’re a wage earner, that is kind of hard.
But if you’re self-employed or an independent contractor, you can do work now in 2008, but not send out the invoices to your customers till January 1, 2009. That is perfectly legit. That’s one way to differ income into the 2009 so you don’t pay taxes on it in 2008.
Here are more important tax planning strategies that can help you save money on your taxes (of course, cash flow permitting):
- Deduction management, which is essentially bunching together your deductible expenses into 2008 if you can. This is especially important for medical expenses, because there’s a limitation on medical – 7.5% of your adjusted gross income. So if you have any medical procedures or dental procedures that you’re putting off now is the time to get them done. You don’t have to pay for them necessarily, you can put them on a credit card and just pay the minimum balance on the credit card, but you can take the full deduction of the year that it took place.
- Pay an extra month’s worth of mortgage interest. So pay your January mortgage interest in December.
- Another deduction management strategy is paying your property taxes by the end of the year.
- Also if you’re an independent contractor and you’re making state estimated tax payments pay the 2008 estimated tax payment before December 31st.
- For anyone who is still in the stock market, long term capital losses can be used to offset long term capital gains. If you had gains at the beginning of the year and losses now, you can use those losses to offset gains. If you have more losses than gains they can only be used to offset 300 of ordinary income per year.
- In terms of gift giving, you can transfer up to $12K per person per year without paying gift tax on the amount transfers. If you have married grandparent, they can give $24K per person by splitting there fist. In 2009, that exclusions rises to $13K each.
- Year-end tax planning also involves maximizing annual contributions to retirement plan accounts, since ones year’s limit cannot be added to the next year’s if not taken in time. Now contributions to IRAs may be applied retroactively, if made before the filing deadline and an individual’s elective contribution. As many plan account owners have realized in 2008, it is that managing a tax preferred retirement account is not a “set it and forget it.” Now in 2008 you can deduct up to $15,500 per individuals. If you’re 55 and over, I believe that goes to $20k , and you can have an arrays of different investments in your 401K. As the individual, you can chose the type of asset allocation or risk that you want.
No related posts.