With Christmas just a few days away and New Year's hot on its heels, I'm sure your thoughts are focused on family, friends, peace, joy ... and tax planning.
What's that you say? Tax planning has not crossed your mind? Well, maybe it should.
And fortunately for you, I have year-end tax planning tips to share, courtesy of Grant Thornton LLP.
Dave Allen, partner and tax-practice leader in Grant Thornton's Salt Lake office, says people shouldn't wait until April to worry about taxes. You can take steps before Dec. 31 that will help you when it is time to file.
In tax-planning meetings, Allen says, the first question people ask lately is what they can do now to save on taxes later.
"A lot of taxpayers have a lot of losses, and they're wondering about the tax implications of selling assets at a loss," Allen says. "They're definitely focused on getting rid of some of their portfolio and some of their loss positions."
That question and others are addressed by the last-minute tax-planning tips from Grant Thornton's national office. Among those tips are:
• Accelerate deductions and defer income. "Generally you want to accelerate deductions into this year and defer income into next year," the company's release said.
• Consider charitable contributions carefully. "Think about giving appreciated property to charity so you can deduct the full value without paying capital-gains taxes," the release said. "But don't donate depreciated property. Sell it first and give the proceeds to charity, so you can take the capital loss and a charitable deduction."
• Prepare to use the low capital gains and dividends rates wisely. "Remember that the 15 percent tax rate on long-term capital gains and qualified dividends is scheduled to increase after 2010," the release said. "President-elect Barack Obama has even proposed increasing this rate sooner for high-income taxpayers."
• Leverage retirement-account tax savings. Allen says you should maximize your 401(k) contributions, especially if your company offers a match. "I look at this as a great opportunity to buy," he says. "You need to be careful what you invest in, but assuming the economy doesn't totally crater, it's a great opportunity to get in."
• Jump-start a 529 plan for education. "As I was looking at some of the ideas for what I would think typical Utahns would be interested in, one would be that 529 education plans are always a great way to put away some money for future education, especially for your grandkids," Allen says.
• Don't forget to use the annual gift tax exclusion. "If you may eventually have to pay estate taxes, consider establishing a gifting program for your children and grandchildren to take advantage of the annual gift tax exclusion," the company release said. "Gifts of up to $12,000 per donee ($24,000 for married couples) are generally excluded from gift tax in 2008 and will be removed from your estate, with no limit on the number of donees."
• Watch out for the "kiddie tax," which requires a portion of a child's unearned income to be taxed at the parents' marginal rate. "Be careful transferring income-producing assets to your kids," the release said.
Allen says tax laws this year aren't drastically different from last year, but the new presidential administration could bring changes. So, now is an especially good time to review your finances and get ready.
"Nothing is one-size-fits-all," Allen says. "Not all of these (tips) work for every individual, and in fact, one that might work great for me would be awful for you. So (you) just need to be careful."
Good advice, Dave. I wish you all a merry tax-planning season.
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