Last week I talked about potential tax traps with year-end mutual fund purchases, and today Kiplinger has some more year-end tax advice that could save you quite a bit on your 2006 taxes. Some of the suggestions are common sense, like maxing out your 401(k) and Traditional IRA contributions and selling poor performing investments, but they introduce a lot of alternative ideas that many of us may not be thinking about.
For instance, I had never considered this before:
Another way to do well while you’re doing good is to donate appreciated assets, such as stock, to your church, synagogue or favorite charity. You get to deduct the full value of the security at the time of donation, not just what you paid for it, and avoid the hassle of selling it and the expense of paying capital gains taxes on the profit.
And I know these flexible spending accounts are becoming more and more popular with employers and employees alike, so this bit of information is important to note:
When it comes to tax savings, paying attention to details and deadlines can add up. For example, if you have a flexible spending account at work for dependent care or medical expenses, make sure you clean it out. Although the IRS now allows companies to give employees a grace period until March 15 to spend their pre-tax flex dollars on health care, not all employers adopted the extension. Make sure you know your plan’s deadline so you can use up the money before you lose it.
Overall, there is a lot of good material in that article to review, even though many people who are on top of their finances are aware of many of the year-end tax tips. Taking advantage of all the deductions and credits available to us is one of the easiest ways to save some money. Make sure you are getting your fair share.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.