April 15 is still more than four months away, but the time to be planning for it, if you haven't started thinking about it already, is now. If you'd like to lighten this year's tax burden, there are some moves you can make between now and New Years Eve.
April 15 is still more than four months away, but the time to be planning for it, if you haven’t started thinking about it already, is now. If you’d like to lighten this year’s tax burden, there are some moves you can make between now and New Years Eve that can help you do that. Some of these strategies are only good for this year, so you need to be even more aware of what tactics are available to you.
One example is the write-off for sales and excise taxes paid on a new vehicle purchased between February 17 and December 31. The deduction applies to the first $49,500 of the purchase price and you can take it even if you don’t itemize. (Note: This deduction isn’t available to joint filers with incomes of more than $250,000). Other ideas that aren’t time sensitive include pulling some expenses into this tax year. This can be helpful with medical costs, which must be more than 7.5% of your adjusted gross income before you can deduct them, and miscellaneous deductions, like investment costs and tax preparation fees, which must exceed 2% of your AGI. Another possible tax-cutting move is to prepay property taxes that aren’t due until early next year to beef up your 2009 deductions.
An important caveat: If you’re subject to the alternative minimum tax, some of these tactics won’t make your tax bill any lower. The AMT doesn’t allow write-offs for property taxes or state and local income taxes, for example, and medical expenses under the AMT must be more than 10% to be deductible. The break on sales taxes on vehicle purchases will apply, however, even if you get hit by the AMT. As with any tax issues, talk to your tax advisor before making any decisions.