Tax Tip of the Week
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Start your year-end tax planning now
For the week of
September 24, 2001
It may be tempting to ignore your taxes until you sit down to prepare your 2001 return. But for those who take the time to do some year-end planning, the rewards can be substantial. Here are some tax planning ideas to consider.
- Prepare a two-year estimate of your income.
Basic tax planning involves the timing of when you receive income or pay expenses. To evaluate what moves make
sense in your situation, you'll need an estimate of your income for both 2001 and 2002.
- Juggle year-end income and expenses.
Individual tax rates will be lower next year, so it may pay to defer income to 2002. Some ideas: Postpone taking
all but the required distribution from retirement accounts, delay collections on installment contracts, and ask
your employer to pay your 2001 bonus in January instead of December.
Once your income exceeds certain levels, over 20 tax deductions and credits are limited or denied. If your projected adjusted gross income is close to the phase-out limits, you may be able to shift income or deductions between 2001 and 2002 to stay under the limit.
Due to future tax rate cuts provided by the 2001 Tax Relief Act, deductions may be worth more this year than next. Consider accelerating deductions into 2001. For example, pay 2001 state income taxes by December 31, and make next year's charitable contributions this year instead.
- Review your tax payments. Don't forget to adjust your withholding or estimated tax payments if necessary. Factor in any changes to your income or deductions from last year's return and the lower tax rates provided by the 2001 Tax Act.
For details on these and other year-end tax planning strategies, give us a call.
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and current tax information.
The information contained in this site is of a general nature and should not be acted upon in your specific situation
without further details and/or professional assistance.
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