Tax Tip of the Week
October 2, 2006

Fall is a great time for a tax review, while there's still time to make changes. Look at these five areas to see how your tax situation is shaping up for the year.

1. Income.

Pull out a recent pay slip and see how your income compares to last year. Factor in any unusual gains, losses, or distributions you expect. Remember, your income level can disqualify you for tax breaks such as credits, deductions, or Roth IRA contributions. If so, there may still be time to manage your income so you qualify.

2. Deductions.

Do you expect to itemize deductions or take the standard deduction? If it's close, consider a "bunching" strategy. That means accelerating deductions and itemizing one year, then taking the standard deduction the next. For example, you can select the timing of charitable contributions or discretionary medical expenses.

3. Retirement contributions.

Are you on track to maximize your contributions to tax-favored retirement plans and IRAs? At a minimum you should contribute enough to earn your employer's match in a 401(k) plan. If you're self-employed, look into a solo 401(k) or a SIMPLE plan.

4. Investments.

Review your investment portfolio. Do you need to rebalance? Are you planning big capital gains or losses? Remember, capital losses can offset gains and even help reduce ordinary income. But never buy or sell just for tax benefits alone.

5. Withholding.

Adjust your withholding so you'll avoid an underpayment penalty or have a small refund if that makes you more comfortable. If you're self-employed, check your estimated tax payments.

Please contact our office if you have questions. We can quickly help you assess your tax outlook and possibly save some tax dollars for the year.

Questions for our Financial Expert?
E-Mail us at: finance@ClevelandSeniors.Com