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Year-End Tax Tips
The bad news is that tax season is just around the
corner. The good news is you can save a bundle on
your taxes if you make the right moves before the
end of the year. Here are a few tips to help you
lower your tax burden.
Gift Receipt
For tax purposes, the Sigma Nu Educational Foundation
will mail the 2004 contribution receipts to donors
by January 31, 2005.
Defer income
Most folks don't have much choice on when they get
paid. But if you are in line for a year-end bonus,
consider asking your employer to give it to you
in January. If you have consulting income, you might
want to delay billing so that you will get paid
in 2005.
Sell depreciating stocks to offset gains
If you have a big capital gain, consider selling
some of the dogs. You can erase your tax liability
on the gain with a corresponding loss. Then you
can apply another $3,000 in losses against ordinary
income. Any additional losses can be rolled over
to subsequent years. This strategy also works with
mutual funds and bonds.
Contribute the maximum to retirement accounts
Increase your 401(k) contribution so that you are
putting in the maximum amount of money allowed.
If you think you can't afford it, run the numbers.
Amazingly enough, these payroll deductions can increase
your take-home pay because they reduce your taxable
income. Also consider contributing to an IRA for
yourself and your spouse.
Take last-minute deductions
Giving a gift before the end of the year (December
31st) qualifies you to receive a charitable deduction
if you itemize when you file your taxes. The authorization
date on a credit card charge or the postmark on
the envelope of a check mailed to us is considered
the gift date. If you donate appreciated stock or
property rather than cash from the proceeds of a
sale, you may be able to give more to the charity
and avoid paying capital gains. Finally, a credit
card gift made by year-end will give you a deduction
in 2004, but you don’t pay for it until 2005.
Update flexible spending accounts
If your company provides flexible spending accounts,
sign up before the end of the year. These programs
deduct money from your paycheck on a pre-tax basis
to pay for a wide range of health care expenses
not covered by insurance and for child care or elder
care.
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