Once again, it's time for my annual holiday tax checklist'Just because the year is quickly coming to a close doesn't mean you can't take advantage of several last minute tax saving tips'Here are some holiday treats that can help cut your 1998 tax bill'All of the items below may not apply to you, but if you're facing a hefty tax bill next April, you may be able to make a few changes before the year ends'
Take a quick look at your income and withholding for 1998'Try to rough out an estimate of what you expect to owe for 1998 taxes'If it appears your withholding is too low, you may want to file a W-4 form with your employer, asking that your withholding be increased for 1999'And, if it looks like you may owe a penalty for underpayment of 1998 taxes, you may be able to talk your employer into withholding an extra amount on your last 1998 paycheck'
âTis the season to be generous! Gifts to authorized charities are tax deductible and you can give all the way up to New Year's Eve and have your gift count as a 1998 deduction'If you've been meaning to make a cash donation to a charitable organization, a church, a school, a shelter â now's the time to get out your checkbook and make someone happy'Remember that the IRS is your partner in charity'If you are in the 28% tax bracket, for example, and give $100 to charity, the IRS returns $28 to you in the form of a tax reduction'You have to be able to itemize deductions in order to get this tax benefit.
Short of cash? Consider weeding out clothing, bedding, dishware, toys; items you've outgrown or have stopped using can find a new home and provide you with a tax deduction'Unwanted canned goods will feed hungry people if donated to food banks'Blankets can find a home at the pet shelters'There are plenty of children who can stay warm with the mittens and mufflers your own kids have outgrown'Get busy before the year is over and grab a charitable contribution deduction for items you donate'Be sure to get a signed receipt from the organization that receives your donations'
Take a look at your personal investments'The stock market took a beating this year, and you may have too'If you've been considering a sale of some of your stock holdings, remember that the timing of a sale is crucial at the end of the year'For tax purposes, the date of a stock sale is the trade date (the date on which you enter into the sale), not the settlement date (the date on which the sale actually occurs)'These dates are extremely important when there is a close call between a long-term and a short-term sale, or when determining if a sale occurs before or after December 31'
New education tax credits are in effect for 1998'If you haven't already met the maximum for qualified tuition payments to colleges and other eligible learning centers for yourself or your children, consider prepaying your January 1999 tuition bill in order to take advantage of either the Hope or the Lifetime Learning Credit'Check out the rules for these credits and determine if you qualify, then consider how the timing of your higher education payments can be scheduled advantageously'
Pay January's bills! If you've made it through the holiday shopping season with cash to spare, take a look at the bills starting to pile up for January'If any of those amounts represent tax-deductible payments, consider paying before the end of the year in order to include the tax deduction with your other 1998 deductions'
Take a head count! Each child under age 17 on December 31 qualifies you for a $400 tax credit on your 1998 tax return'
Take one more look at your IRA investment situation and consider that new Roth IRA as a viable alternative'You may be able to donate up to $2,000 to either a traditional or a Roth IRA'You actually have until April 15 to put money into an IRA and have it count as a 1998 contribution'However, if you are considering converting money from a traditional IRA to a Roth IRA, the conversion must be initiated prior to the end of the year'
As the clock strikes midnight on December 31, run out to the garage and write down the mileage on your odometer'Anyone who takes a deduction for automobile mileage needs a year-end odometer reading to help determine how many total miles were driven for the year'
And finally, just in case you have extra time on your hands during the holidays (right!), don't forget to get a head start on 1999 by setting up folders or envelopes to keep track of your tax receipts for the new year!