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Year-End Tax Advice 

When December 31 starts to get near most of us are still thinking of the holidays, some of us are thinking of ways to give ourselves a present. Lower Taxes.

There aren’t many things left at the end of the year that you can do to save taxes, but here are a few.

Charitable contributions are one area that you can save taxes on. But any checks must be postmarked by December 31, 1999 to count. Amounts charged to credit cards also count even if not paid until 2000. Charitable contributions of property such as automobiles, clothing, furniture, etc. are also deductible if given in 1999. (Note: if you pay Colorado tax, you might want to investigate making contributions to charities in enterprise zones or child care facilities in Colorado in order to take advantage of tax credits that will reduce your Colorado liability.

If you have stocks or other properties that have appreciated in value and you donate them to a charity, you get special tax treatment. You can deduct the entire value of the gift and the charity can sell the property and get the money. The only one who doesn’t get anything is Uncle Sam, but he gets enough already.

You might consider prepaying your real estate taxes on your home and/or your rental properties. Just be sure and let your mortgage company know what you have done to try to avoid double payment of your property taxes.

Instead of paying your mortgages in early January, consider prepaying them in 1999. Allow enough time for this payment to get the mortgage company or do a check by phone. This will allow the payment to be posted and a correct Form 1098 to be issued to you and the IRS. If the 1098 is incorrect, you can still claim the deduction, it just makes the paperwork a little worse.

If there are any repairs or other maintenance items your rental properties might need, this would be a good time to do them. Watch if you have high income and losses from rentals. You may be limited in the amount of loss you can take.

If you decide to start up a home business, you could buy the equipment and supplies necessary to operate the business and deduct them this year. Just make sure any equipment is actually placed into service by December 31.

Depending on whether you have coverage by a retirement plan through your employer, you might be able to make a deductible contribution to your Individual Retirement Account or IRA. If you are covered but your spouse isn’t, you might still be able to contribute to an IRA and take a tax deduction for both. Look into non-deductible IRAs or Roth IRAs. Neither one will allow you a tax deduction. But the money coming out of a regular IRA will largely be taxable, while the money coming from a Roth IRA is totally tax-free. Income limitations apply. Check with your tax advisor or financial advisor.

Consider whether bunching certain deductions can save you money. If you have very high medical or employee business expenses, by moving them from one year to the next you might be able to deduct more. This is true especially if you expect to have lower income in one year than the other.

If you owe state estimated tax payments or other state taxes, pay them before December 31 to get a tax deduction. They don’t have to be in the state’s hands by year end. Just make they are postmarked. (If you are subject to the alternative minimum tax, this advice may not apply to you. See your tax advisor first.)

The last tax tip I have is a bit self-serving, but it’s still worthwhile. Get your stuff to your accountant (if you use one, and if you don’t, WHY NOT?) as early as possible. Tax preparers start getting busy in early to late February and if you don’t get your stuff in before the end of March, you should start to consider an extension. Note that extensions give you more time to file, not to pay. If you have everything together except for a last minute K-1 or other item, it is best to get the work in to the accountant and reserve your place in line and send in the last WHEN you get it. Remember, accountants are people, too, and we get tired and overworked like the rest of you. So please be kind to your accountant and send him or her a well organized tax package as early as possible. It will save you time and money. And put a smile on your tax preparer’s face. (Cookies and other food items do that too, but that’s another column.)