Nov 7th 2002
KPMG's Personal Financial Planning unit has compiled a list of 12 tax-saving tips that individuals can use between now and December 31st to reduce their 2002 tax bills. Here are the tips in brief:
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- Review your stock portfolio and consider using capital losses to offset capital gains. Keep in mind that a net capital loss of up to $3,000 can offset ordinary income.
- If you have stocks that decreased in value this year, consider donating the proceeds of the loss to charity. This way, you can claim a capital loss and a charitable contribution.
- Take advantage of the new contribution limits for both traditional IRAs and Roth IRAs. If you're 50 or older, you can use new "catch-up" provisions.
- Consider making contributions to a 529 college-investment plan or a Coverdell education savings account.
- If you're financially able, consider establishing a gift-giving program for children and grandchildren to take advantage of the tax-exclusion increase.
- Rethink your charitable contributions. Confer with your tax professional to determine if the contribution should be made in property or cash.
- If you have self-employment income, start a Keogh plan by December 31, 2002.
- Enroll in an employer-sponsored dependent care program and/or a medical expense reimbursement plan.
- Learn about how the Alternative Minimum Tax (AMT) will affect more taxpayers beginning this year. Be especially sensitive to the AMT if you live in a high-tax state.
- Pay the final installment of state-estimated tax by December 31, 2002 to receive a deduction for this year, rather than 2003. But be aware of possible AMT ramifications.
- Accelerate deductions into this year by prepaying some of next year's deductible expenses, and defer income, where possible, until next year.
- If you are one of the many individuals who experienced a job loss in 2002, tally up all job-search-related expenses. You may be eligible for a deduction if your expenses exceed 2 percent of your adjusted gross income.