Defer income into the 2009 so you don’t pay taxes on it in2008
. If you’re self-employed or an independent contractor (like acarpenter, electrician, plumber, psychologist, psychiatrist, chiropractor,doctor, etc.) you can do work now in 2008, but not send out theinvoices to your customers till January 1, 2009. This is perfectlylegitimate and you won’t have to pay taxes on that income till youreceive payment in 2009.
File your return on time, even if you don’t have the money topay your tax bill.
If you can’t afford to pay your taxes, you can stillfile your return on time and save 25% on the failure to file penalty rightoff the bat. What many people don’t understand is that filing anextension just puts off the inevitable, because it’s not an extension of time to pay, it’s just an extension of time to file.
Accelerate your medical expenses.
If you itemize your deductions,there’s a limitation on medical expenses and you may deduct only theamount by which your medical care expenses for the year exceed7.5% of your adjusted gross income. So if you have any medicalprocedures or dental procedures that you’re putting off, now is thetime to get them done. You don’t have to pay for them necessarily, youcan put them on a credit card and just pay the minimum balance onthe credit card, but you can take the full deduction of the year that ittook place.
Pay you’re an extra’s month’s worth of the mortgage.
Makeyour January mortgage payment in December, so you get can deductthat interest in 2008.
Pay your property taxes early.
Pay your property taxes that aredue in 2009 by the last day of 2008 to accelerate that deduction.
Long term capital losses can be used to offset long termcapital gains
. If you had gains at the beginning of the year and lossesnow, you can use those losses to offset gains. If you have more lossesthan gains they can only be used to offset 300 of ordinary income peryear. Please keep in mind though that unrealized (not actually sold)losses, especially those in retirement accounts are not deductible.
Use gift contributions to lower your tax liability.
In terms of giftgiving, you can transfer up to $12K per person per year without payinggift tax on the amount transfers. If you have married grandparent, theycan give $24K per person by splitting there fist. In 2009, that exclusionrises to $13K each. Persons over the age of 70 ½ can contribute up to$100,000 from their retirement accounts to a charity of their choicewithout paying taxes on that income.