YEAR END ACTIONS TO REDUCE TAXES

There are still some year-end actions that taxpayers can take to reduce their 2003 tax bills. Detailed below are seven simple activities that taxpayers can complete in order to lower their 2003 taxes.

1. Do an estimate of the 2003 and 2004 income and related tax liability. If the tax brackets for each are different, consider shifting income to the lower-bracket year and deductions to the higher-bracket year.
2. If analysis of the 2003 and 2004 income and related tax liability shows that there could be benefits associated with squeezing more deductions into 2003, pay any outstanding property tax bills, make charitable donations, and schedule and pay for elective medical treatment before the end of 2003.
3. A gift of appreciated property, is a particularly attractive charitable contribution from a tax perspective. Deductions can be taken for the fair market value of such a gift without paying tax on the appreciation, either under the regular tax or the alternative minimum tax (AMT). As there are certain salient restrictions applied to this type of donation and tax deduction, it is advisable to consult a tax professional before donating.
4. The income tax due for 2003 can be reduced by contributing to a 401(k) plan, a Keogh, an SEP, or an IRA.
5. Investments that have earned capital gains can increase tax liability. Consider taking capital losses to offset 2003 capital gains that have already been realized. As much as $3,000 of excess capital losses over capital gains can also be deducted against ordinary income such as salary.
6. Review participation in real estate ventures. It could be that some adjustments before the close of 2003 will facilitate the ability to maximize the tax deduction for any losses incurred in 2003.
7. Consider delaying or accelerating a 2003 year-end marriage or even a divorce. Significant tax savings could result from moving the date from next year to this year. Find out how a change in marital status would change this year's tax liability.