As the year winds down it's wise to consider a few ways to reduce your tax bite. Here are my top tips for those who itemize deductions. If you don't, then I have just one tip for renters - Max out your 401k or IRA contributions as a way of reducing your taxes; and one tip for homeowners - you can deduct some amount from your taxes for your property tax payments even if you don't itemize. This is just for '08 and I absolutely recommend you check with your CPA for details on how it works.
For itemizers who own their homes, I hope you paid both halves of your property tax in this calendar year. Why wait until 2010 to get your tax deduction on the second half of your property tax? I also suggest you pay your January mortgage payment this month for the same reason. Get the deduction this year.
You should contribute anything to Goodwill that you have of value before the end of the year. Be sure to get a receipt and list out the fair market value of the items donated. Remember that all items must be in at least 'good' condition.
Now's the time to make charitable contributions of cash. Even better give appreciated stock and take the full value as the contribution with no taxable gain to you. If you donate with a credit card and don't pay the bill until next year you can still take the deduction on this year's taxes.
Lastly, if you don't have a retirement account, then you may want to set up an IRA. You can donate to it until April 15, 2009 to take the deduction on this year's taxes. Interesting how that works.
As with all these tips, please check with a CPA for clarification before proceeding.
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