Start thinking about tax returns now : Rooftop Views

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Start thinking about tax returns now

It's not too early to starting thinking about your tax return. There are things you can still do this year to save those tax dollars. Trevor Rice, a CPA for Stern, Kory, Sreden and Morgan in Santa Clarita, California, says, "The end of the year is the perfect time to look at your options as a taxpayer."

Retirement Accounts
Number one on Rice's list of suggestions is the ability to increase your contributions toward a tax-deferred retirement account based on any excess cash flow. In other words, instead of putting money into a savings account during the last two months of the year, put it into a retirement account. For 2006, the IRS has established a maximum contribution of $15,000 into your 401(k). However, if you are age 50 or older before year end, you may be able to make additional payments of up to $5,000. If your employer has a matching program, then you will also receive the added benefit of this "free" money.

Stocks
For anyone who has sold stocks at a gain this year, be prepared to pay taxes on those gains. If you've been successful in this area, it may be advantageous to also sell some of your stocks that are losing money. The reason is you can net these losses against your gains to zero out your tax liability. Any net losses in excess of $3,000 for 2006 may be carried forward and deducted in coming years.

Charitable Contributions
Whether it's giving a little extra to your favorite cause, or donating an automobile that's been sitting in your driveway, a charitable contribution is a noble way to gain tax deductions. Rice went on to say that the end of the year provides a perfect opportunity to do "a little house cleaning" as well. He advises going through closets and the garage and donating anything that's no longer of use to you to a qualified charity. Not only will this benefit someone else, it will also minimize your clutter and provide you with a tax break.

Paying Early
Mortgage interest, property taxes, and state income taxes are examples of items you could pay in 2006, ahead of their due dates in 2007. Deductions are based upon when the items are paid, not when they're due. Rice says if you're planning on doing this, be careful of AMT (Alternative Minimum Tax) which can eliminate the benefits of early payment of taxes for those who fall into this unfortunate category.