Last-Minute Tips For Trimming Your 2007 Taxes
The Wall Street Journal:
Many taxpayers still have time to make last-minute moves that could trim their tax bills significantly for 2007.
These include traditional tactics such as dumping investment losers, donating stock to charity, and timing deductions and income carefully. But taxpayers should also consider a few other strategies that stem from recent tax-law changes, such as an expansion of the so-called kiddie tax next year and a charitable-giving provision scheduled to expire at the end of this year.
* Make a gift to your kids. A law enacted earlier this year will expand the reach of the kiddie tax, which generally requires a child’s income above a certain amount to be taxed at the parent’s higher rate. But this change won’t take effect until next year, thus creating tax-saving opportunities this year for some families.
* Donate high-flying stock. If you itemize your deductions instead of claiming the standard deduction, consider making last-minute gifts to qualified charities. But don’t just write out a check. Think about donating shares of stock or mutual funds that have risen sharply in value over the years. That way, you won’t owe capital-gains tax on the gain and you typically can deduct the full market value of your gift.
* Make a donation from your IRA. Take advantage of a law scheduled to expire at the end of this month that could benefit many older taxpayers. If you’re 70½ years old or older, you can transfer as much as $100,000 this year directly from your individual retirement account to a qualified charity without having to pay income taxes on that money. Also, the transfer counts toward your minimum required distribution for the year. Just make sure the gift is made directly from the IRA to charity.
* Boost your retirement savings. This year, millions of workers who are under age 50 can sock away as much as $15,500 in a 401(k) plan, up from $15,000 last year. Those who are 50 or older by the end of this month can put away an additional $5,000, the same as last year. Thus, the limit for 2007 is $20,500, up from $20,000.
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