Year-End Tax Ideas

Retirement Planning

• Remember to take your Mandatory Retirement Distribution before December 31.
• Maximize your contributions to your employer-sponsored plans to take advantage of pretax contributions to 401(k) or 403(b) plans of up to $16,500 plus catch-up contributions of $5,500 if 50 or over. All plan assets grow tax deferred.
• Consider starting a Roth IRA to take advantage of tax-free growth of your retirement assets with tax-free qualified distributions by making an annual contribution of $5,000 plus catch-up contributions $1,000 if age 50 or over.
• If you retire and receive a lump-sum distribution from your employer’s retirement plan, roll it into an IRA within 60 days to avoid current income tax while assets grow tax deferred.

Portfolio Management

• Execute a Bond Swap by selling a bond for a capital loss, to deduct from gains in other investments, and then immediately buy another bond which better meets your investment objectives i.e. improving credit quality, call protection, current income, diversification, liquidity, etc.
• Consider taking some losses on investments when you have already realized gains to offset them or vice versa.
• Sell assets with capital gains on a year-to-year basis to reduce your overall tax burden.

Estate Planning

• Gift up to $26,000, per couple, in assets free of federal gift tax to each of your children.
• Create a trust in a gift or estate plan to provide significant tax savings while preserving some control over the assets.
• Donate appreciated assets, such as publicly traded securities which you have owned for more than a year, to get a tax deduction for the full fair market value of the security as well as avoid paying capital gains tax on the appreciation.

Education Planning

• Consider starting a Section 529 plan to create a tax-free savings account to fund college expenses.

Increase Deductions

• Consider paying your first quarter real estate tax bill early so they qualify on your 2002 tax return. In some cases you can prepay your mortgage so you can claim the interest charges.
• Convert non-deductible interest expense such as interest on credit cards and automobile loans into deductible home mortgage interest. You can deduct the interest on a home equity loan or line of credit because the interest on your home equity loan is deductible no matter what the loan money is used for.