Tax-Saving Ideas to Consider Before 12/31/07
The year is fast slipping away. Now is a good time to consider your year-end tax planning and the Fort Sanders Foundation offers the following suggestions:
Take out a copy of the federal tax return you filed for 2006. Did you “itemize” your deductions? Look at the deduction categories in Schedule A with an eye to maximizing those deductions before 2007 comes to an end. If you used the standard deduction, make it your goal to pile up enough deductions to “itemize” for 2007. Consider “bunching” some 2008 deductible expenses with this year’s deductions. You may be able to prepay 2008 real estate taxes in 2007, for example:
Investigate postponing some income into 2008.
Unless you expect to pay alternative minimum tax (AMT), try to defer some investment income. You might want to purchase short-term (one year or shorter) certificates of deposit that can’t be cashed without penalty before the 2008 maturity date. Interest earned on a CD in 2007 won’t be taxed until 2008. U.S. savings bonds (series EE or I) defer reporting of interest until you cash the bonds. And if you plan to sell property, ask your advisors about using an installment sale that postpones some of the tax.
Take stock of your stocks…and other investments.
If the market hasn’t been kind to your portfolio, consider selling some “losers.” Capital losses are fully deductible against capital gains, and any excess losses can be deducted against ordinary income up to $3,000. Capital losses can be carried over to subsequent years. Note: If you sell stock at a loss, you will have to wait 30 days before repurchasing similar shares. Of course, if you have managed some substantial appreciation (and now are subject to significant capital gain taxes), now is a good time to consider gifting these stocks to the Fort Sanders Foundation.
Contribute the maximum to your qualified retirement plan or IRAs…
particularly any plan where an employer matches part or all of your contributions. Consider contributing to a nondeductible IRA if you are already giving the maximum to other plans.
Consider family gifts.
You can give away $12,000 annually to as many different people as you wish free of federal gift tax ($24,000 per person for married couples who “split” gifts). Gifts of income-producing assets may also save the family income taxes if the recipient is in a lower tax bracket than the donor. Note: Investment income exceeding $1,700 to children under age 18 is taxed at the parents’ top tax rate (the socalled kiddie tax).
Maximize charitable deductions.
You may want to make your 2007 and 2008 charitable contributions before the end of this year, especially if it enables you to “itemize” this year. Consider:
- Gifts using stocks and bonds which have a long-term large capital gain (the profit escapes tax and your charitable deduction will be the investment’s full fair market value, if held more than one year). Note: Gifts of securities may be deducted up to 30% of your adjusted gross income, with a five-year carryover for excess deductions. The date of delivery of gifts to charitable organizations such as Fort Sanders Foundation determines whether a gift will be deductible for 2007. A check will be considered delivered to Fort Sanders Foundation as long as you mail it on or before December 31, 2007. If your securities are held in a brokerage account, please have your broker contact our office as soon as possible to ensure timely delivery and acknowledgement.
- Some gifts can give you an income for life. A charitable gift annuity or charitable trust may be the ideal way to gift appreciated stock or real estate AND receive a substantial charitable deduction, avoid capital gain taxes, receive an income stream for the rest of your life AND have the satisfaction of being acknowledged now for this future gift to Fort Sanders Foundation.
- Unless Congress changes its mind, we’re now in the final few months of being able to have donors over age 701/2 make charitable gifts through their IRAs. You can instruct your IRA trustee to make transfers to the Fort Sanders Foundation and other charities of choice without incurring taxable income on those amounts. Up to $100,000 can be given in this manner. No income tax deductions are available for IRA gifts, but IRA donors can still save significant taxes by removing taxable income from their asset base. This is an ideal way to pay off multi-year pledges or even advance your usual annual giving (making your 2008 contributions in 2007). Note: The IRA trustee must transfer all gift amounts. You should not make withdrawals yourself and then write checks to your charities of choice.
Please contact Jeff Elliott, vice president of development, at (865)531-5210 or jelliott@covhlth.com if you would like more information about planning gifts of any kind, including IRA contributions.
This information is educational and not to be considered as legal or financial advice. For this, see a qualified legal or financial planning professional. Special thanks to R&R Newkirk for some of the information contained within this article.
Want more information online?
Check out these websites:
Social Security website: ssa.gov
Obtain a Social Security statement of benefits: https://s044a90.ssa.gov/apps6z/isss/isss001.jsp
Federal government Medicare website: medicare.gov
Ways to make a charitable gift to the Fort Sanders Foundation: fortsandersfoundation.org
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