The clock is officially ticking. You only have a few more hours to lower your 2008 tax bill. Here are some last minute suggestions:
- Make a donation to charity. Cash, check or credit card payments made by the end of the year to a qualified charitable organization will result in a charitably deduction. Get a receipt!
- Pay existing medical expenses. You can pay off those medical bills now (consider paying by credit card) and deduct the medical expense.
- Pay January’s mortgage. Prepaying your mortgage in 2008 adds to your mortgage interest deduction.
- Buy something expensive. The choice to deduct either state and local income or state and local sales taxes on your federal income tax return was extended through 2009 as part of the bailout package (see, some good came of it). So, if you live in a high sales tax state, consider making a large purchase now – you know, a car or other high ticket item that you’ve been putting off.
- Sell some losing stocks. The purpose of selling losing stocks is to offset gains. I know it wasn’t a big year for gains – but someone had to have some… right?
- Consider prepaying college tuition for 2009. You can claim education credits whether you itemize or not.
- Settle on a house. For first time homebuyers, you can buy a house and receive a tax credit – restrictions definitely apply on this one.
- Save twice by making a contribution to a qualifying retirement account now. You get tax savings now plus you’ve put something away for a rainy day.
- Pay January’s student loan payment now. Interest paid on student loans may be deductible.
- Get an eye exam – and buy your prescription lenses today. You’ve been putting it off and you know you need one. And it’s deductible.
- Clean out your closet. Make a donation of clothes, furniture and other items that you’re not using – but still in good condition – to a qualifying charitable organization.
- Buy a Honda. I’m serious. You can’t get a tax credit for a Toyota Prius anymore… but the tax break for the Honda Accord and Honda Civic will stick around until January 1, 2009.
- Prepay real estate taxes. Real estate taxes are deductible – and since you generally pay in the spring anyway – why not pay early?
- Pick up your prescriptions now. Prescription meds are deductible as a medical expense. Assuming that your insurance company and doctor allow it, pick up a few months in advance.
- Settle insurance claims. You may want to settle insurance or damage claims now in order to maximize your casualty loss deduction for 2008.
- If you are age 70 1/2 or older, own an IRA and are feeling charitable, make a gift now from your IRA. Arrange for the gift to be made directly by the IRA trustee to maximize your tax savings.
- Renew your subscriptions to professional journals.
- Pay union or professional dues now.
- Enroll and pay tuition for job-related courses.
- Go green. Install solar electric systems, small wind systems and/or geothermal heat pumps and take a residential renewable energy credit for 2008 (but hold off on the purchase and install energy-efficient windows, insulation, doors, roofs and heating and cooling systems – the clock on those credits doesn’t start until January 1, 2009).
- Pay the babysitter. If you work, you may be entitled to get a credit for dependent care expenses.
(Items #17-19 are all deductible as a miscellaneous job expense)
Of course, there are a lot of phase-outs, caps and other restrictions that may apply to deductions, credits and other tax-cutting actions. And these tips may not work for your individual situation – especially if you are subject to the AMT. The best course of action is to always check with your tax professional for more information.
I know there are more helpful tips out there. Share your favorites below!
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.