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(ARA) - Shopping, baking, decorating … if your family is like mine, a lot of time and energy goes toward holiday plans with friends and family at this time of year.
But one uncle may be forgotten, though he shouldn't be. Uncle Sam will be paying a visit to your pocketbook in April, and now's the time to loosen his grasp. You may have opportunities before the end of the year to trim your 2001 tax bill. However, once you start singing "Auld Lang Syne," it's too late.
Major tax legislation was passed this year, so talk to your tax advisor to be sure you're taking advantage of all possible tax breaks. Ask if the following strategies are appropriate for you.
Get into the Spirit of Giving
Millions of Americans donated to relief efforts following the Sept. 11 attacks. Your local charities, however, are feeling a pinch. Remember that you can deduct charitable donations on your tax return. Gifts made by credit card can be deducted this year as long as the transaction goes through by Dec. 31. Be sure to get a receipt for any donations over $250. If you give appreciated assets (stock, for instance), you get a double-whammy tax bonus. You can deduct the full market value of the donation and avoid capital gains tax on the appreciation.
Take Your Losses
If you have losing investments in your portfolio, consider selling them and taking the loss. You can use losses to offset capital gains dollar for dollar. After all gains have been offset, you can apply up to $3,000 in losses against ordinary income. Excess losses can be carried forward and applied in future years.
Put Off Payday
If you're expecting a big chunk of dough at the end of the year, such as a commission check or year-end bonus, consider requesting that it be delivered in January instead so you won't have to pay taxes on it until next year, when income tax rates will be lower.
Bunch Deductible Expenses
You can deduct medical and dental expenses that exceed 7.5 percent of your adjusted gross income. This category of deductions is larger than you may realize. It includes health insurance premiums, the cost of eyeglasses and contact lenses, and payments for stop-smoking programs. If you're nearing the 7.5 percent threshold, you might want to schedule and pay for elective doctor and dentist visits before year-end.
Bunching miscellaneous deductible expenses, which can be deducted when they exceed 2 percent of your adjusted gross income, may also help you trim taxes. You may be able to deduct tax preparation fees, professional dues and subscriptions, work clothes costs, union dues and expenses of looking for a new job.
Sacrifice Now, Save Later
Going over your finances now could pay off with a smaller tax bill come April 15. So, take a little time out from holiday preparations and get to it. There'll be a candy cane waiting for you when you're done.
Jim Larranaga is executive vice president of Priority Publications, a Minneapolis-based publisher of financial newsletters. Courtesy of ARA Content, www.ARAcontent.com, e-mail: info@ARAcontent.com
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