Michelle Singletary, who writes the syndicated column "The Color of Money" for The Washington Post, says it's not too late to set your 2003 taxes straight. To make things a little easier on tax day, she offers year-end tax tips from the accounting firm KPMG:
1. Review your investment portfolio every year to determine whether you have any capital losses to offset capital gains. But don’t sell anything from your portfolio just to get a tax break. Put your investment strategy first.
2. Consider making contributions to a 529 college investment plan. In fact, more than two dozen states allow residents either a full or partial tax deduction for contributions to their state 529 plan. To find out if your state allows a deduction and how much, go to www.savingforcollege.com. Click on the link that says "Compare 529s." Then go to the 529 Evaluator, which allows you to conduct a side-by-side comparison of 529 plans across the country.
3. If you have made charitable contributions, don't forget to get receipts. If you give $250 or more to a charity, you need to have a receipt to claim the deduction. For example, if you tithe or make sizable offerings, be sure to have your church, temple or mosque provide you with a statement that says you did not receive any goods or services in exchange for your donations. If you give an item worth more than $5,000 (other than money and publicly traded securities) you have to have what the IRS calls a "qualified appraisal," and you must attach an appraisal summary (Section B of Form 8283) to your tax return. For more information on this requirement, refer to IRS Publication 526, "Charitable Contributions," or to Publication 561, "Determining the Value of Donated Property."
4. Accelerate deductions into this year by prepaying some of next year's deductible expenses, such as subscriptions to professional journals and trade magazines or licenses and regulatory fees.
5. Defer income, where possible, until next year. This can work particularly well for the self-employed and others who have some degree of control over when they get paid. On the other hand, if you think you will be in a higher tax bracket in 2004, try to get all income you're due before year-end.
Remember: Before you ring in the New Year, do what you can to ring up some additional tax savings.