End-of-Year Tax Saving Strategies: “Makin’ a List and Checkin’ It Twice”

By Diane Sague Ehnes

We all have that list of family and friends for whom we must get the perfect holiday gift. As you’re making your lists, make a list of possible year-end tax planning strategies for yourself and your family.

Some strategies you may include on your list:

Make sure you have applied for Social Security numbers for all dependents; to claim the tax credits on dependents, they must have registered numbers.
If you are looking for a tax deduction, contribute to a Traditional IRA (assuming that you qualify to make deductible contributions). You can contribute up to $4,000 to an IRA, and if you’re age 50 or older, you can contribute up to $5,000 to an IRA. You can generally make 2007 contributions to your IRA until April 15, 2008.
Employer-sponsored retirement plans such as 401(k) plans allow you to contribute funds pretax, reducing your 2007 income. For 2007, the maximum amount that you can contribute to a 401(k) plan has increased to $15,500, and if you’re age 50 or older, you can contribute up to $20,500 to a 401(k). The window to make 2007 contributions to your 401(k) closes at the end of the year.
If you’re self-employed, consider setting up a retirement plan for yourself – there are different max contributions depending on what type of plan you choose. (Some deadlines may have already passed for this year.)
Make a charitable donation. A last-minute gift of cash, toys, or even old clothes, can reduce your tax bill – just remember to keep those receipts!

Have a wonderful holiday! And don’t forget…. always, consult legal, tax, and financial advisors to determine appropriate strategies for your individual situation.

Diane Sague Ehnes is a Financial Advisor with Waddell & Reed. She can be reached at 503-238-6036 x203 or dsehnes@wradvisors.com. Waddell & Reed does not provide tax or legal advice and nothing in this article should be construed as specific tax or legal advice. Please consult your tax or legal advisor regarding you situation prior to making financial decisions.