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Year-end is fast approaching, and that means time is
running out for taking actions that will reduce your
2006 tax bill. Here's a brief checklist of actions you
might want to consider.
* Squeeze in deductible expenses before December
31 if you'll be itemizing on your tax return. Example:
Make your January mortgage payment in December
to get an extra interest deduction in 2006.
* If you're short of cash, pay deductible expenses
with a credit card before December 31. You pay the
bill next year but get the deduction on your 2006
return.
* If you're in business and need a piece of equipment
or office furniture, make the purchase before year-
end to take advantage of the first-year expensing
option (limited to $108,000 for 2006).
* If you're planning to sell an investment, look at
offsetting gains with losses, plus taking up to $3,000
of net losses against ordinary income such as wages.
* Take advantage of the $12,000 per recipient annual
gift tax exclusion by completing gifts before year-end.
There may be other year-end tax moves suited to
your particular situation. For a review of what will
work best for you, give me a call today.
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Contributing to a retirement plan is one of the best
financial and tax-saving moves you can make. Timing
can be important, so be aware of deadlines related to
retirement plans. Here are a few reminders.
* Time is running out for 2006 contributions to 401(k)
plans. This year, you can put up to $15,000 in your
401(k); if you'll be 50 or older by December 31, that
limit increases to $20,000.
* If you have a SIMPLE retirement plan, the 2006
contribution limits are $10,000 if you're under 50 and
$12,500 if you're 50 or older.
* IRA contribution limits for this year are $4,000 for
those under 50 and $5,000 for those 50 and older.
* If you're over 70= years old, you generally have to
take a minimum distribution from your IRA by
December
31. If you just turned 70= this year, you can delay
your first distribution until next April, but that
means you'll have two taxable distributions in one
year.
Unless you're still working, these rules also apply
to other retirement plans. Note, however, that no
annual distribution is required for Roth IRAs.
* A new retirement plan option is available this year
and next - giving up to $100,000 each year directly
from an IRA to an approved charity. You must be
age
70= or older to qualify for this tax break. The
charitable donation counts toward your required
minimum distribution, and it is not subject to income
tax.
If you would like more information about anything
relating to retirement plans and your 2006 taxes, give
me a call.
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Sincerely,
Linda Heineman
Linda L. Heineman, CPA
email:
llhcpa1@yahoo.com
phone:
626-577-0979
web:
http://llhcpa.com
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