|
Although 2005 is quickly winding down, there is
still time to take advantage of these tax saving
opportunities for 2005.
Woburn, MA (PRWEB) November 30, 2005 –- “It's not too
late to cut your 2005 tax bill, before December 31st,”
assures Andrew Schwartz, founder of the MDTAXES Network,
an affiliation of CPAs throughout the country that
specializes in tax planning and preparation for
healthcare professionals.
Here’s
how:
·Increase your 401(k) and 403(b) contributions
if you haven't been contributing at the maximum rate all
year. This year you can put up to $14,000 into your
401(k) or 403(b) plan at work. Anyone 50 or older by
December 31 can make additional “catch-up” contributions
of $4,000. Contributing to a 401(k) or 403(b) plan at
work is one of the best tax shelters available to you
during your working years.
·Set up a Solo 401(k) if
you’re self-employed and have no employees who work more
than 1000 hours per year, except your spouse. With these
tax advantaged retirement accounts, you can contribute
$14,000 plus 20% of your net self-employment income, up
to $42,000 for 2005. If you are 50 or older, the max
increases to $46,000.
·Take a look at your
withholding and instruct your employer to withhold
additional taxes if you haven’t had enough taxes
withheld during the year to avoid getting hit with an
underpayment penalty.
·Consider selling your
investments held in non-retirement accounts that have
decreased in value since your capital losses can offset
other capital gains realized during the year (including
from your mutual funds). Excess losses can then be used
to offset up to $3,000 of wages and other income. Make
sure to wait at least 31 days before buying back a
security sold at a loss, or the IRS will disallow the
loss under the "wash sale" rules.
·Send in your
January, 2006 mortgage payment early enough so it will
be processed prior to 12/31/05. By sending in your
payment a few weeks early, you can deduct the interest
portion of that payment a full year earlier.
·Clean
out your closets and donate your clothing and household
items to a charitable organization, since "non-cash"
contributions are deductible if you itemize. Don’t
forget to get a receipt. For gifts of money, making your
donation by credit card before December 31st allows you
to deduct the donation on this year's return, even if
you don't pay your credit card bill until 2006. And you
always have the option of donating appreciated
investments to charities. You get to claim your donation
based on the value of the assets donated, without paying
any capital gains taxes on the appreciation.
·Review
your miscellaneous itemized deductions. These items,
such as unreimbursed employee business expenses and
investment fees, are deductible to the extent they
exceed 2% of adjusted gross income (AGI). Items paid
with credit cards are deductible in the year charged.
Beware of the Alternative Minimum Tax (AMT),
however.
·Pre-pay your projected state tax shortfall
if you'll be itemizing your deductions and not subject
to the AMT.
·Pay off your medical bills. Medical and
dental expenses are deductible if they exceed 7.5% of
your income. Payments for services not yet performed are
not deductible.
“Finally, you should evaluate whether
you'll save any taxes by postponing 2005 income or
deductions into 2006 or by accelerating 2006 income or
deductions into 2005,” explains
Schwartz.
Andrew D. Schwartz, CPA is the
editor and a major contributor to www.MDTAXES.com, a website that
provides income tax and financial planning information
geared towards healthcare professionals. Yahoo! Internet
Life magazine chose MDTAXES.com as one of the seven
essential sites for the savvy do-it-yourself taxpayer.
Schwartz has also appeared on CNBC's Money Club. He is
available for interviews.
| 
