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Tax Planning- It's never to Early to talk About

Updated on January 9, 2009

Staying ready to take advantage

Despite passing three major pieces of tax legislation in the past year, Congress is still considering a host of expired and expiring provisions. While some of the provisions will be renewed for the 2008 tax year, the uncertainty creates a challenging planning environment.

With the window of opportunity created for many tax-saving moves closing on December 31st, it make sense to focus on the basics and staying ready to take advantage of the latest break through legislative developments.


Year-end tax planning is not only about 2008 in as much that is about the 2009. People miss the real opportunity for tax savings when it come s to looking to the year that comes. You want to take advantage on paying taxes at a lower rate, when you can predict. In that case, some simple year-end moves can pay off in a big way.

This expamle is ilustrating how it works: You might be able to defer a year-end bonus, or delay the collection of business debt, rents, and payments for services; similarly, you may be able to accelerate deductions into 2008 by paying some deductible expenses in December rather then January.


For those who are subject to the AMT, traditional year-end maneuvers, like deferring income and accelerating deductions, might hurt you actually.

The AMT - a separate federal income tax system with its own rates and rules, effectively disallows a number if itemized deductions; best is to consult with your Tax Advisor. Example: if you are subject to the AMT in 2008, prepaying 2009 state and local taxes won't help your 2008 tax situation, is rather hurting your 2009 bottom line.

Congress is likely to take some action, but the specifics are uncertain; make sure you stay up-to-date on any new developments.

Year end Tax solutions

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Freedom is never Freemake year-end last minute decisionsget your questions answered
Freedom is never Free
Freedom is never Free
make year-end last minute decisions
make year-end last minute decisions
get your questions answered
get your questions answered

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DON'T overlook IRA & Retirement plan opportunities

Traditional IRA's and employer-sponsored retirement plans, such as 401K, allow you to contribute funds pretax, reducing your 2008 income. On the other hand your contribution to Roth IRA or Roth 401K aren't deductible, so you have no interest to participating on those, but the Qualified Roth distributions are completely free from Federal income-tax, making these savings vehicles very appealing.


  • for 2008, your maximum contribution to an IRA has increased to $5,000.
  • contributions for a 401K plan increased up to $15,000.
  • for those 50 or older, you can contribute up to $6,000. to an IRA and up to $$20,500 to a 401K

The 401K plans window for contributing to 2008 is the end of 2008, while you can generally make 2008 contributions to your IRA until April 15, 2009

Whether you qualify, make sense of what to consider to be your moves. Funds that you convert, to the extent the funds represent investment earnings and deductible contributions, are consider taxable income.

ROTH conversions

  • Individuals who would like to contribute to a Roth IRA but don't qualify because of income limitations might benefit from making nondeductible contributions to a traditional IRA today, and converting the funds to a Roth IRA in couple of years, when the income limits no longer apply.
  • Additionally, for Roth IRA convestion in, lets say 2010 only, any resulting taxable income will be deferred until 2011 and 2012 (with 50% taxed in each year)

AMT triggers

  • Very common triggers you are subjected to the AMT is if you claim a large number of personal exemptions, deductible medical expenses, state and local taxes, and miscellaneous itemized deductions.
  • others include home equity loan interest when proceeds aren't use to buy, build, or improve your home, and the exercise of incentive stock options.


filling tax return habits

As a resident,(private party) do you file your own taxes

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