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photo by steed media service
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The year 2007
will go down in financial history as erratic. Gas prices hover at $3
per gallon and the Federal Reserve continues to lower their benchmark
federal funds rate (the interest rate set by the Federal Reserve for
banks lending money to each other overnight), which is currently 4.25
percent (as of Dec. 19). It’s the third cut this year in an
effort to impede the rate of foreclosures. While we cope with the highs
and lows of the economy, it’s imperative that we not get
sidetracked and end up getting slammed on April 15, 2008, with a high
tax bill.
Here are five proven strategies to keep the 2007 tax bill low.
– yvette caslin
1.
Make the maximum contribution to your 401(K) plan or any other
tax-deferred qualified retirement plan. This happens to be the best
method of all because you’re funding your savings and Uncle Sam
won’t touch it, unless you withdraw from it prematurely.
2.
Make charitable donations, cash or non-cash. IRS rules are stringent,
so it’s mandatory that you retain receipts. This rule applies to
church offerings also. ro informed you in a finance feature earlier
this year that you must have receipts or cancelled checks to claim
collection plate offerings as an itemized deduction. And those non-cash
contributions like old clothing and household items, must be in
“good used condition or better” to qualify for a tax
credit. The Salvation Army has posted a great valuation chart to assist
you with determining the value of items in this category, visit
www.satruck.com/ValueGuide.asp. If you’re considering donating a
car or boat and believe the value exceeds $500, become familiar with
The American Job Creations Act of 2004, which was designed to provide
relief for taxpayers on their federal and state income tax bills.
3.
Make some energy efficiency improvements to your home like insulation
systems that reduce heat loss/gain, exterior windows and skylights,
exterior doors, and metal roofs that meet Energy Star requirements
(www.irs.gov). The improvements must be made at your primary residence
to qualify. Your tax preparer can advise you about the law and tax
credit offered.
4.
If you fall into a higher tax bracket, postpone your income from
bonuses and commissions until next year. According to cnnmoney.com,
income ranges that apply to each tax bracket go up with inflation
annually, so more of your income will be taxed in 2008 at lower rates.
5.
If you’re a small business owner, request your clients pay you
after the first of next year. This applies only if your business is in
good financial standing.
