Get in the holiday spirit. Giving more to charity this year—perhaps advancing gifts you plan to make early next year—can mean a bigger reward on 2008's tax return.
Tips:
- A donation by credit card is deductible this year, even though the bill isn't paid until next.
- Taxpayers age 70½ or older can directly transfer a donation of up to $100,000 from an IRA and avoid the possible adverse impact of having to include a withdrawal in gross income before donating it.
- Investors who donate appreciated stock can deduct the current market value as a donation and also avoid capital-gains tax on the appreciation.
Spread the wealth. An easy way to pare an eventual estate—and thus lower potential estate tax—is to make yearly gifts to family members and others. For 2008, you can give up to $12,000 apiece to any number of recipients and avoid gift or estate tax snares that can mean a tax hit now or in the future. A husband and wife can jointly double that.
Estate attorneys can parlay annual gifts with other estate and gift tax exemptions and strategies to shelter much, if not all, of even large estates.
Note: A check must be given or mailed before year-end and should be cashed promptly to avoid any questions on whether it's a 2008 transaction.
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