Top 10 TaxTips

The hustle and bustle of the holiday season is in full gear -- shopping for that perfect present, baking holiday treats, decorating your home and preparing your 2008 tax return??? Although Uncle Sam is not typically included in your holiday plans, wrapping up a few simple financial tasks before the end of the year can help carry the joy of the season all the way through April 15. The Illinois CPA Society recommends the following tips to consider doing before December 31 to help save money and minimize your 2008 tax bill.

1. Maximize your retirement account contributions. If you have a company-sponsored 401(k) plan and are not already contributing the maximum to it, it's not too late to increase your contributions. For 2008, you can contribute a maximum of $15,000 ($20,000 if you're over 50). Additionally, if you'd like to open an Individual Retirement Account (IRA), you have until April 16, 2009 to open it and make a deductible contribution for the prior year. The maximum contribution is up to $4,000 with an extra $1,000 allowed to people 50 or older. A married couple can save up to double the caps, even if only one spouse is employed.

2. Consider Roth IRAs and 401(k) options Contributing to a Roth IRA or Roth 401(k) option would give you totally tax free income at retirement. Even though you don't get a current year deduction, your contributions grow tax free and there is no tax when you withdraw money at retirement. Roth 401(k) plans don't have income limitations - if your company plan allows Roth contributions, see if this option is best for you.

3. Give to charity. Giving money or other items to a charity is a great way to save on taxes and help others. If you itemize, your contribution is tax- deductible. Be sure to get your donation postmarked or in the hands of your favorite charity by December 31 and obtain a receipt for donations of $250 or more.

4. Defer income If you're self-employed or have sideline income, consider deferring income into 2009 by delaying billing. Employees don't have a choice of when they get paid, but if you're in line for a year-end bonus, you might ask your employer to hold off until January. Of course, it only makes sense to defer income if you expect to be in the same or lower tax bracket next year.

5. Reap the tax benefits of being green. In addition to helping the environment, there are also tax benefits to being green. If you're going to make your home more energy efficient within the next two years, you can get up to $500 in tax credits. If you have a new home that is energy efficient and uses 50 percent less in heating and cooling costs than other homes, you can get up to $2,000 in tax credits. Also, buyers of hybrid cars starting this year can get a credit of $250 to $4,000 against their income tax, based on the model of their car. But credits apply only to the first 60,000 hybrid cars sold by each automaker.

6. Use flexible spending account dollars. A law enacted for 2005/2006 loosened the use-it-or-lose-it constraint by allowing spending plan participants to make claims against their accounts for up to two months and 15 days after the end of their benefit year. That means employees on a calendar benefit year now can use their 2008 FSA contributions for expenses incurred as late as March 15, 2009. And if you're planning any elective surgery (e.g., laser eye surgery) for next year, you can prepay enough to use up this year's shortfall and allocate those expenses to next year's medical reimbursement plan.

7. Prepay your mortgage payment If you itemize deductions, consider paying your January 2007 mortgage payment by December 31, 2008 to deduct the interest this year.

8. Offset gains with losses Tally up your investment winners and losers for 2008. Then, determine whether it makes sense to take tax losses by selling your unattractive stocks. If your losses exceed your gains, you can deduct up to $3,000 in capital losses ($1,500 for married couples filing separately) against your other income, reducing the amount on which you must pay taxes. Losses in excess of $3,000 can be carried forward into subsequent years.

9. Convert to non-deductible interest. Consider whether it might make sense to convert non-deductible interest into a tax break by applying for a home-equity loan. You can use the proceeds of a home-equity loan to pay off your high-interest credit-card balances and, in most cases, fully deduct the interest you pay on home-equity debt.

10. Organize your tax records. Organizing your tax records and paperwork early gives you time to request copies of any missing documents and makes it less likely that you will miss valuable deductions when you file your 2008 tax return. If you are unsure of the documents you need to complete and support your tax return or to take advantage of other tax-savings opportunities, consult a CPA. "In the midst of last-minute shopping trips and holiday gatherings, getting prepared for your income taxes is probably the last thing you have on your mind. However, by taking a few minutes to address these tax-savings opportunities you may be able to alleviate some of the crush of your holiday spending," stated Elaine Weiss, president and CEO of the Illinois CPA Society. "A CPA can look at your total tax situation and provide personalized advice on which strategies will allow you to hold onto the maximum amount of your hard- earned money."

Update for 2014: There are many new tax products available today that let you do everything from electronically file your tax return to perform cloud accounting. It's never been more easy to find a great system when you compare accounting software products.

Comparism by price, product option, ease of use and ease of updating information should be priority.

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