Last-minute tax check may be worth money next year

Consumers caught up in the spirit of Christmas giving may want to take some time now to consider how much they are going to give back to the Internal Revenue Service next year.

There are several things taxpayers can do to reduce their 2007 tax liability if they act before the end of the year, local tax professionals say.

Here are few things to keep in mind this week:

• Try to bunch all your big medical expenses into one tax year, said Michael Moore, a certified public accountant with MJ Moore & Co. Either spend it all now or wait until 2008, he said.

In order to deduct medical expenses, a taxpayer must spend more than 7.5 percent of adjusted gross income on medical expenses, Moore explained. That means spending more than $5,625 if the taxpayer has $75,000 in adjusted gross income.

• Contribute the maximum $4,000 to an Individual Retirement Account. For taxpayers over 50 years of age by the end of the year, the maximum is $5,000. Taxpayers who have income less than $52,000 may get a "Saver's Credit" from the IRS for up to $2,000.

• Deduct the cost of energy saving improvements to your home. Individual taxpayers who replace windows or doors, insulation or heating and cooling equipment may be eligible for a maximum $500 tax credit.

• Deduct up to $250 in out-of-pocket expenses if you are a full-time teacher. Qualifying parents may deduct up to $4,000 for tuition and fees.

• Make charitable contributions. Cash contributions, no matter how small, cannot be deducted without documentation such as a bank statement or canceled check, with the name of the charity, date of the gift and amount donated. Juanita Roper, president of the Nevada Society of Enrolled Agents and owner of White & Associates Tax Services, recommends taxpayers keep a clear, accurate receipt of goods given to charity in order to document possible tax deduction.

• Consider giving securities such as common stock that has appreciated in value, rather than contributing cash. "This allows you to give the maximum to the charity of your choice while incurring the minimum in capital gains taxes," said Harris Private Bank of Chicago.

"If you give appreciated property to charity, you'll be able to deduct the full appraised market value," the bank said.

• Sell assets that have lost value, such as common stocks, by Dec. 31 and you can use the loss to offset gains from other sales.

• Make an extra mortgage payment for January by the end of 2007. That would allow taxpayers to deduct the interest paid that month on their 2007 tax return.

• Prepay January 2008 tuition for your college students to increase the amount of tuition you may claim for either Hope or Lifetime Learning credits.

• Remember to deduct sales taxes from your income, personal and business. Even sales taxes on large items such as autos, boats, aircraft and sometimes home improvements may be deducted. `

Congress is expected to renew the deduction and apply it retroactively when it reconvenes next year.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or (702) 383-0420.