Some moves to make now, to save on taxes come April

The Ticker

December 04, 1996|By Julius Westheimer

ASK YOUR BOSS to delay your bonus. Pay a state tax installment before you have to. Hold back on receiving too much tax-free income.

You can save tax money by making those moves, and these, by Dec. 31:

If you took capital gains this year, consider selling stocks that declined to offset your gains.

If you took losses, sell appreciated stocks to take the profits without paying capital gains taxes.

And remember: Even if you have no gains to offset, you may use losses to offset up to $3,000 of ordinary income.

Also, never let taxes dictate investment judgment. Any time I sold stocks just to offset gains, the action backfired when the stocks I sold eventually moved much higher.

Don't buy mutual funds before the funds distribute year-end gains. Since these gains are taxable, you could pay taxes on gains you didn't receive. Ask your broker for the fund's distribution date.

Push taxable income into next year by using savings or money funds to buy T-bills or CDs that won't be taxable until after Dec. 31.

And ask your employer to pay your bonus after Jan. 1 instead of in December. This pushes your tax back one year.

Give appreciated stocks, not cash, to charities. That strategy gives you a full deduction for the shares' market value, and you don't pay taxes on the shares' appreciation.

Maximize retirement plan contributions. If you want to make a 1996 Keogh contribution, you must open the account this year, but you may fund it after the year ends.

Beware of the alternative minimum tax (AMT). If you claim a large number of deductions and/or have high tax-free income, ask your accountant whether you're subject -- or close -- to being hit by the AMT.

AMT is a 26 percent-28 percent rate applied to your taxable income, with some deductions taken away. "It's the IRS' insurance against tax under-payment," says Fortune, Dec. 9.

TAX QUICKIES: Pay your Jan. 15, 1997, Maryland income tax installment this month and get a 1996 deduction. Use Voucher No. 4.

Prepay 1997 property taxes this year and delay the tax one full year.

Check with your lender to see if you can pay January's mortgage bill in December and get a 1996 deduction.

Bunch your deductions, because some expenses are deductible only when they exceed a percentage of your adjusted gross income.

Make full use of gifts to family to reduce estate taxes. You may give up to $10,000 a year to as many people as you like, tax free.

Pay college tuition to the college, not the child, exempting the payment from the gift tax.

On all of the above -- and other tax matters -- see your accountant regarding your personal tax situation.

Many accounting firms will mail free year-end tax-saver booklets. Call them before supplies run out. They're listed in the Yellow Pages.

Pub Date: 12/04/96

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