Monday, September 1, 2008

Time's running out to reduce your 2008 tax bill


Early fall is the perfect time to take stock of your
tax situation for the year. You have enough information to produce a reasonably close estimate of your 2008 income and deductions, and there's still enough time left before year-end to make some tax-saving moves.

Here are a few possible tax-savers to consider.

* Avoid tax underpayment penalties by adjusting your
income tax withholding over the remainder of 2008. Withholding is treated as having been paid in evenly over the full year.

* Review your investment portfolio for year-end  offsetting of gains and losses. Don't forget that you can apply up to $3,000 of net capital losses against  ordinary income such as wages.

* Make retirement plan contributions up to the maximum  allowed. That's $15,500 to a 401(k) and $10,500 to a   SIMPLE ($20,500 and $13,000, espectively, if you're   50 or older). This year's IRA limit increased from   $4,000 to $5,000 (to $6,000 if you're 50 or older).

* Remember that the "kiddie tax" now applies to you if   your child has unearned income over $1,800 this year   and is under age 19 (under age 24 if a full-time   student).

* You have until December 31 to take any required
  minimum distribution from your retirement plans. If  you just turned 70½ in 2008, you can postpone a first  distribution until next April 1, but then you'll have   to take two distributions in 2009. 

The tax law changes so frequently that you could miss opportunities if you don't invest a little time in an annual review of your tax situation. Call us NOW if you would like to get together to discuss your tax-cutting options.