Now is the time to evaluate tax strategies

December 20, 1992|By James M. Woodard | James M. Woodard,Copley News Service

Near the end of one year or the beginning of the next is a good time to evaluate and plan your tax strategies for the coming year. And some of those taxes are tied to your home or other owned real estate.

One action that could save you tax money is to pay that second installment of your property tax before the end of the year, thus making it a deductible item on your next income tax return.

Personal tax planning is important. And it should be reviewed by a competent tax adviser. Whether to take standard itemized deductions is a decision that should be made early in the year, according to Richard Best, an accountant for 27 years.

"This is a good time to generally review personal finances and plan for next year," Mr. Best said. "There is also pending legislation affecting taxes that some property owners might want to actively support or fight."

One proposed bill would reduce the current estate tax exemption from $600,000 to $200,000. Currently, only about 3 percent of Americans pay estate taxes. But lowering the exemption to $200,000 would mean most families would be subject to estate taxation.

For example, a middle-class family with an estate worth $400,000 could be hit with a $67,000 tax. An estate worth $600,000 would pay $138,000.

Other currently proposed tax-related laws would:

Allow penalty-free withdrawals from IRA accounts for first-time home buyers.

Reform the passive loss rules so that all taxpayers whose primary business is real estate can deduct rental property losses from a category of income, "active income."

Create permanent extensions of the mortgage revenue bond, mortgage credit certificate and low-income housing tax credit programs -- all designed to make housing more accessible to low and moderate income families.

Provide new tax incentives for pension funds to invest in real estate. This could pave the way for the establishment of a secondary market for commercial mortgages, thus putting new life into this almost-dead phase of mortgage lending.

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