Holiday shopping season seems to start right around Halloween these days, so why not get a similar jump on tax season? While it’s true that FSAs and 401(k)s aren’t as much fun as trees and tinsel, you’ll be a whole lot merrier come April if you do some preparing now. Here are seven smart year-end tax tips:
1. Gather your paperwork
You can start filing your taxes as early as mid-January. And the earlier you file, the sooner you get your refund. Create a folder into which you can throw all your 1099s, charitable donation receipts and other pertinent documents. Come the New Year, you’ll have a running start on all the other filers.
2. Pay your mortgage a day early
If you pay your January mortgage on Dec. 31, you can deduct the interest portion of that month’s payment from your 2007 income, rather than waiting until next year.
3. Check up on your FSA
If you’ve got a tax-free flexible spending account at work through which you pay medical or child-care expenses, use up your 2007 contributions now or risk losing them. Assess your FSA spending from this year and decide how much you want to contribute in 2008.
4. Max out your retirement plans
If you haven’t been contributing the maximum to your 401(k) all year long, some employers allow you to make catch-up contributions now. And, if you’re eligible, consider opening an IRA. It may be an excellent place to stash extra Christmas bonus cash.
5. Give charitable donations
For the friend who seems to already have everything, a contribution to his or her favorite cause can be a great gift. The bonus: you may be able to deduct the charitable contribution from your income.
6. Give cash
‘Tis the season for giving, right? If you were considering making a large cash gift to a child or other relative, now is a good time to do it. Gifts of up to $12,000 a person don’t have to be reported.
7. Get married
This one may be a little hard to pull off at the last minute, but depending on your situation it can yield a tax bonus. Even if you tie the knot at 11:59 pm on Dec. 31, the IRS considers you married for a whole year. For some, that can result in significant tax savings. So check with your tax adviser if you were thinking of taking the leap soon anyway. (Tax accountants also love year-end babies, for similar reasons. Of course, timing that one is even trickier.)
Tax advisers get as busy as Santa’s elves after the New Year, so contact one now before you make any significant year-end tax moves.
Related Articles
