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November 26, 2004 04:51 PM

Line Up Your Tax Deductions


Excerpt: When Jan. 1 rolls around, it will be too late to do much about taxes on income earned this year. So don't make the serious mistake of waiting until after the end of this year before lining up all the legal and legitimate deductions and tax breaks that you can. Here are half a dozen of the more popular ones.


Welcome to December, turning the calendar to the time when we have barely one month to take steps to reduce our income tax bill for 2004.

When Jan. 1 rolls around, it will be too late to do much about taxes on income earned this year. So don't make the serious mistake of waiting until after the end of this year before lining up all the legal and legitimate deductions and tax breaks that you can. Here are half a dozen of the more popular ones:

Give to charity. You have until Dec. 31 to mail your check to your alma mater, your church or synagogue, or your favorite secular charity and write off the gifts on your 2004 tax return. If you give to an obscure charity, be sure that it has been approved by the IRS. The law limits your deductions for charitable contributions to 50 percent of your adjusted gross income, so don't go overboard. You can squeeze out a few extra dollars by making your contributions with a credit card now, and paying when your bill comes in during January.

Give appreciated investments. You're usually much better off to give away not good old cash but appreciated stocks, bonds or other assets. That way, you can double up on your tax benefits by making a charitable donation and avoiding tax on the appreciation in value of the donated property. Say that you bought a stock several years ago for $2,000, and it is now worth $10,000. You want to make a significant donation to your alma mater. By giving the stock directly to the university, you avoid paying capital gains tax, currently 15 percent if you've held the stock for more than one year, or 28 percent if you've held it less than a year. You'll also realize a deduction of the stock's full fair market value, not that of a lesser donation once tax has been paid.

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Read all 46 posts in the same category of Tax:

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Year-End Tax Planning Moves for Small Businesses - Dec 08, 2004
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