Thomas Murphy, CPA

The management of your finances toward year-end can have a significant effect on your tax liability. If you think you will be in a higher tax bracket this year than next, then you will want to make tax deductible expenditures before year-end (if you itemize):

- Purchase a business auto

- Purchase business furniture and equipment

- Donate property to charity (cash, clothes, furniture, cars, art work, securities)

- Delay receipt of year-end bonus until January

- Pay state property or intangible taxes if they have been billed

- Pay for medical expenses (glasses, dental, hearing aids, doctor visits)

Long-term gains on most security sales after May, 2003 are taxed at 15% (high income taxpayers) or 0% (low income taxpayers). There is a new 20% tax that applies only if you are in the highest tax bracket of 37%. Most dividends are now taxed at the new capital gains rates (20%, 15% or 0%). However, some dividends on mutual funds and foreign stocks are still taxable at the old capital gains rates.

If you have losses on securities you still hold, it may be advantageous to sell those securities to allow for those capital losses to offset capital gains you may have incurred during the year. Also, net capital losses can be deducted up to $3,000 per year. Consider selling securities to incur losses, and then use the proceeds to purchase similar securities before the prices go back up. This way, you can deduct losses while still holding on to your investments. Remember that you must wait more than 31 days if you intend to repurchase the same security you sold!

Important Tax Law Information

- IRA deductions are available to most participants in employer retirement plans

- Business Mileage allowance is 67 cents per mile

- Non-taxable IRA distributions to charity are available for those over 70 1/2 years

- Saver's Credit provides for a credit of up to $2,000 for IRA contributions

- IRA contribution limit for most taxpayers for 2024 is $7,000 (under 50) or $8,000 (50 or over)

- Alternative Minimum Tax Exemption amount will now be adjusted for inflation each year