Maximize Pension Plans, 401(k) plans, and IRA’s.  Often this must be done by year end.  Consider a Roth IRA if your gross income level is not too high (Roth phase out is between $150,000 and $160,000 for married filing jointly status).  In some cases, we may need to prepare your tax return, before it can be determined if you qualify.

If your tax bracket is higher for 2007 than 2008, it may be beneficial to accelerate deductions into 2007 and defer income to 2008.  Deductions that can be moved into 2008 by tax basis taxpayers includes payment of your April 2008 property taxes, and payment of State Income tax obligations that will be due by April 15, 2008.  To deduct these items, they must be paid by the end of 2007.  You can email us to get a State voucher for payment of your taxes if you do not already have one (current clients only).

Remember to try and achieve Long Term Capital Gains on investments.  Generally, you must hold your property at least one year to acquire long term gain status.  The past few years there have been huge capital losses.  Capital losses are limited to $3,000 per year unless you have gains to offset them against.  Consider selling enough of your depreciated stock this year to realize the $3,000 deduction.  However, you rarely should let tax motivations be the predominant factor in your investment decisions.  For 2007 Capital Gain rates are 5% or 15%.  Qualified Stock Dividends are also taxed at 15%.

Additional First Year depreciation (also known as Section 179) The maximum Section 179 deduction for 2007 is $125,000.  There is a limiting threshold on taxpayers purchasing more than $500,000 of fixed assets.

Maximum IRA contributions For 2007 the maximum is $4,000, with a $1,000 catch up provision for those over 50 years old, making the total contribution for an over 50 qualifying individual $5,000.  Pay IRA fees with funds outside your IRA (to maximize the benefit of your retirement account).  If you or your spouse is covered by a pension plan, your ability to make a traditional IRA contribution may be diminished or reduced.  For example, if your spouse is covered by a pension plan at work, and you are not, your ability to make a deductible IRA contribution starts phasing out with AGI at $150,000 and is completely phased out with AGI exceeding $160,000.

Consider Charitable Contributions of Cash or Goods before December 31st.

The annual gift exclusion for 2008 is $12,000 per person.  However, you can effectively gift an additional amount if you pay school tuition directly to the educational institution.  Contact us directly for details.

Social Security Tax Wage Base:  For 2008, the wage base for withholding social security (old age, survivors, and disability insurance) is $102,000.  There is no wage base limit for Medicare (hospital insurance- 1.45%).  For social security, the tax rate is 6.2% each for employers and employees.