By Kris Nolan
It’s important to make tax decisions before year’s end, when
your window of opportunity for 2006 slams shut.
It’s important to make tax decisions before year’s end, when your window of opportunity for 2006 slams shut.
Consider the following tax moves:
Be energy efficient. You can claim a credit of up to $2,000 for installing solar water heating equipment in your home. You can also claim a credit of up to $500 for making various energy-saving improvements such as energy-efficient heat pumps, air conditioning, insulation materials, and exterior windows and doors. Also, the purchase of a qualifying alternative-fuel vehicle could provide you with a tax credit of up to $3,400.
Flexible spending account (FSA). Maximizing your employer’s FSA will generally allow you to decrease your taxable income while at the same time paying for otherwise nondeductible expenses. And with the new “grace rules,” an FSA is much less of a use-it-or-lose-it proposition.
Beware of the new “kiddie tax” rules. The age limit for the imposition of kiddie taxes on a child’s unearned income has been increased recently from 14 to 18. Take time to review these rules and make changes to allow for the reduced payment of the kiddie tax now and in future years.
Retirement contributions. Maximize the contributions to your employer’s tax-deferred retirement savings plan, thereby saving taxes immediately and deferring taxes on earnings in your account. Also don’t overlook an IRA contribution if you qualify (either Roth or traditional).
Charitable contributions. If you’ve held appreciated stock for more than one year, consider donating those shares to charity rather than making cash donations. You’ll avoid paying taxes on the stock’s appreciation, but can claim the full fair market value of the stock as a charitable deduction.
CPA Kris D. Nolan is a partner at Bianchi, Lorincz, Huey, Hudson and Co.
