If you’re looking to reduce your federal taxes for 2008 here are two things I’m doing that you should consider before the end of the year:
Pay Your Property Taxes
Here in Texas my property taxes aren’t due until January 31. However, these taxes can be deducted as an expense against your income on your 2008 federal tax return, as long as you pay them in 2008. I paid mine a week or so ago in full with the money I’d saved through my employee stock purchase plan (ESPP).
If you escrow your property taxes (i.e. pay them with your mortgage payment) then consider making an extra payment or two prior to year end. This will decrease your taxes by increasing the amount you can deduct for mortgage interest expense and property taxes.
Pay Your Sales Taxes
If your plan is to make a large consumer purchase (e.g. car, boat, etc.) within the next few weeks, consider making the purchase prior to year end. The sales taxes incurred on the transaction can be deducted from your 2008 taxes.
We’re considering a new car purchase over the next few days. We’ve been able to secure some very reasonable financing and we’re aiming to make the purchase within a day or two. The sales tax we’re paying on the new car can then be deducted as expense on our 2008 tax return, lowering our taxes.
A word of caution…don’t let the “tail wag the dog” here. Unless you were already planning a big purchase, don’t shoot for this deduction. Making a big consumer purchase is best when you’ve had time to evaluate your needs and create a plan to get the best deal. Don’t go buy something big just to get a little tax deduction.
Other Year End Tax Tips
9 Year End Tax Savings Tips @ Free From Broke
Year End Tax Moves @ Cash Money Life
Year-End Tax Tips: 2008 @ Million Dollar Journey
17 Tips for End of Year Tax Planning @ My Dollar Plan
Year End Income Tax Guide (Part 1) @ Tough Money Love
What other year-end tax plans do YOU have?