2007 Year End Planning Tips


by Jon Grob

 Grob, Jonathan jgrob@mcgrathnorth.com

(402) 341-3070

The following strategies may reduce your 2007 tax liability:

Separate IRA Accounts.  Multiple beneficiaries who inherited an IRA during 2006 can split up the IRA into several accounts until December 31, 2007.  If split up, the required minimum distribution rules will apply separately to each beneficiary’s account.  The benefit of this action is that IRA distributions can be taken out over each beneficiary’s life expectancy, rather than the life expectancy of the oldest beneficiary.  This provides the maximum tax deferral of the IRA distributions.

Decrease Taxable Income.  Consider reducing your 2007 taxable income by: (a) increasing contributions to 401(k) plans, SIMPLE pension plans, and Keogh plans; (b) increasing contributions to health savings accounts; (c) delaying investment sales (to reduce capital gains) until 2008; (d) making investment sales to recognize capital losses in 2007; and (e) deferring receipt of year-end bonuses until 2008.

Increase 2007 Deductions. Consider increasing your 2007 deductions by: (a) prepaying expenses and property taxes that would otherwise be paid in 2008; (b) extending subscriptions to professional journals; (c) prepaying union or professional dues; and (d) enrolling in job-related courses before year-end.

Make Charitable Gifts Through IRAs.  If you are age 70½ or older, own IRAs, and are thinking of making a charitable gift, consider arranging for the gift to be made directly by the IRA trustee.  Up to $100,000 may be donated in this manner.  The benefit of this is that no income tax will be paid by the donor when the donation is distributed from the IRA  and the distribution is also counted in determining whether the donor has received the required minimum distribution for 2007.
You should consult with us or your tax advisor before implementing any of these strategies, particularly if you may be subject to AMT.

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