Personal Tax Strategies

  • Lower your taxable income by shifting income to other family members. However, watch out for the kiddie tax.

  • Calculate the value of the tax benefits received to see who should claim education credits—you or your child.

  • Take maximum advantage of your employer's flexibile spending account, 401(k) plan, medical savings account, health savings account, or health reimbursement arrangement.

  • Consider filing separately if one spouse has many itemized deductions that are subject to a floor amount.

  • Consider charging charitable contributions, medical expenses, business expenses, and some state tax payments if you need the deductions this year, but do not have ready cash. For tax purposes, these deductible expenses are considered "paid" when charged. Just remember to pay them off quickly to avoid increasing debt.

  • Consider your plans for the near future. How will marriage, divorce, a new child, retirement, or other events affect your year-end tax planning?

  • Think about the best ways to gradually transfer your estate tax free. Consider establishing a gifting program under which you and your spouse transfer a combined $28,000 each year to any number of recipients.

  • Make sure your spouse owns sufficient assets to take full advantage of his or her potential estate tax exemption if he or she predeceases you. Make gifts to your spouse that qualify for the unlimited gift tax marital deduction if necessary.

  • Donate appreciated property to charities to avoid capital gains tax. The amount of your deduction is the value of the property rather than its cost. Special rules can apply.

  • Repay personal debt or replace it with a home equity loan to avoid nondeductible interest payments.

  • Accelerate or defer income and expenses. Bunch expenses into a year when limitations or phaseouts won't reduce their benefit.

  • Unless the AMT applies, pay state and local taxes or your January mortgage payment before December 31 to increase Federal deductions this year.

  • If you can, consider pushing a year-end bonus or commission check into the new year.

  • Make sure that you qualify for the home office deduction by not using the designated office space for personal activities at any time.