Boston 12/27/2007 1:56:46 AM
Tax-Cutting Tips to Use or Lose by December 31
Seven favorite tips from Mass-based wealth manager Paul J. Mauro, CLU, ChFC
“Use it or lose it!”
That goes for year-end, tax-cutting tactics that can save money, help make retirement more secure and help the children and grandchildren with tuition or a down payment on their first home.
Here are seven favorite, last minute tax-saving tips from financial expert Paul J. Mauro, CLU, ChFC. Mauro is the founder and CEO of Legacy Financial Advisors, Inc., a wealth-management firm specializing in retirement and estate planning (www.lfsadvisors.com). Offices are in Milford, Massachusetts, New Jersey, South Carolina, Texas, New Mexico and California.
Older Americans – or younger wealthy ones for that matter – can make gifts – directly or in trust funds to children, grandchildren or even friends without the recipients owing any income tax on the gifts. Federal tax exclusion limits are $12,000 per year, per person. A couple, for example, can give up to $24,000 in 2007 to each of their three children and six grandchildren, with no tax consequences for the offspring.
IRA deposits can wait until April 15 2008, for a tax deduction in 2007. “Contribute the maximum to tax-advantaged pension plans before funding an IRA. If one member of a couple is self-employed and using an IRA as a pension plan and the other is employed at a company that offers a 401(k) plan, contribute to the spouses 401(k) in December and fund your own IRA by tax-filing deadline next year,” states Mauro.
Accelerate payment of tax-deductible expenses by December 31. Extra mortgage or credit card payments for business-related purchases will not help. The IRS goes by the bank statement for the mortgage and the date-of-purchase for business expenses charged on a credit card. Use a credit card to buy extra business supplies or airline tickets for an upcoming business trip to cut this year’s taxes, if doing will not result in a financial burden. If possible, defer income due until January.
Pay long-term nursing care Insurance in full to maximize the potential business or personal tax deduction.
“Need to offset capital gains from stocks or other investments sold in 2007? Sell loser investments by December 31 to offset gains and buy them back after Feb 1, 2008,” says Mauro adding, “However be sure to wait at least 30-days to avoid wash sale rules.”
Consider a UNI-K plan to write off self-employed income. Many employees, who have a 401(k) plan at work, are also self-employed as consultants elsewhere. The IRS considers this activity a separate business eligible for its own pension plan. UNI-K plans offer many of the benefits of a 401(k), but are easier to set up and administer. Tax-deferred limits can be as high as $40,000.
Lastly, quips Mauro, “Pay your investment advisor’s fees by the end of 2007 to deduct the cost against investment gains for the year.”
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Securities and advisory services offered through SII Investments, Inc., member FINRA SIPC and a Registered Investment Advisor. Legacy Financial Advisors and SII Investments, Inc. are separate and unrelated companies. SII does not provide tax or legal advice.
