By Jeff Rattiner, CPA, CFP®, MBA Jeff Rattiner is an SGML AFP instructor and president and CEO of JR Financial Group, Inc. with offices in Denver and Phoenix.
What better time for planning taxes than the looming New Year? Here are five pointers for making 2008 a financially productive year:
1. Claim a Section 179 deduction.
- Business owners can expense up to $125,000 in new purchases immediately (as opposed to depreciating the assets over their useful life). This lets you increase your expense immediately and lower your overall income tax liability.
2. Beware of kiddie tax issues
- The kiddie tax age has been raised to 19 or up to age 24 for full time students. Kiddie tax is applied on unearned income (dividends, interest and capital gains) over $1,700. It does not apply to earned income (such as working as Wendy's, etc.) .
3. Delay taking IRA distributions.
- Postpone taking IRA distributions until after age 70½, if possible. This lets your IRA continue compounding on a taxdeferred basis and avoids immediate income tax liability.
4. Be smart about capital gains.
- Many people extensively trade with no purpose. One client transacted 80 annual trades with a mere $300 gain! Question each trade. Make long-term investments. Keep emergency monies in liquid
accounts.
5. Earning income and turning it into retirement-account dollars.
- People who earn a profit on their Schedule C (sole proprietor schedule) should establish a SEP or a SIMPLE for those monies. Clients making considerable side money in 2008 can save up to $45,000 in a SEP. Those making less than $9,000 can contribute this into a SIMPLE. Both reduce the taxable
base for social security and mean paying less self employment tax.
Jeff Rattiner is an SGML AFP instructor and president and CEO of JR Financial Group, Inc. with offices in Denver and Phoenix.
Read other ExEd Articles
