Year-end tax savings for individuals

“Countdown” time is here again, with reminders everywhere pointing out how many days are left until anticipated events. While you’re marking your calendar, remember that countdown time is great for tax planning, too, because it means you can still implement strategies to reduce your 2007 tax bill.

Here are three actions for your to-do list:

  1. Review retirement contributions. If you’re not on track to reach the maximum deferral allowable, consider increasing your contributions. Pre-tax retirement plan contributions reduce federal adjusted gross income – and your tax. 

    For 2007, you can contribute up to $15,500 to your 401(k), plus an additional $5,000 if you’re 50 or older by year-end. The maximum SIMPLE contribution is $10,500 (plus $2,500 if you’re over age 50).

  2. Estimate tax liability. Figuring out whether you’ll be over- or underpaid now gives you time to adjust the income tax withheld from your wages for the year. As a general rule, to avoid penalties for underpayment you’ll need to prepay at least 90% of your tax liability for 2007.
  3. Take advantage of expiring tax provisions. The nonbusiness energy property credit, which lets you claim a credit of up to $500 against your federal tax bill for certain energy-efficient home improvements, expires December 31, 2007. 

    December 31 is also the last date for making charitable donations of up to $100,000 from your IRA. If you’re age 70½ or older, these distributions may be nontaxable while satisfying your minimum annual withdrawal requirement.

Please contact us for additional tax saving ideas tailored to your circumstances.

 http://huddlestontax.com

 

About the author

Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. Since 2002, he has owned his own small business, Huddleston Tax CPAs. He is a graduate of Washington State University and the University of Washington School of Law.

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