Contact:
Lois Whitehead, Public Relations Manager
212-719-8405
lwhithead@nysscpa.org

NEW YORK, NY, October 31, 2006 – The New York State Society of Certified Public Accountants recommends these Yearend Tax Tips for consumers:

1. Be Energy Conscious: Do you plan to build an energy-efficient home in the United States during the next two years? If so, you can receive up to $2,000 in tax credits if it is substantially completed after August 8, 2005. To qualify, the house should have an annual heating/cooling savings at least 50% less then a comparable house and at least 10 of the 50 percent should come from the building envelope. The home must be acquired prior to 2008. If you already own your home but make it more energy efficient, you can collect up to $500 in tax credits if the upgrade happens within the next two years.

2. Do A Tax Projection: The only way to know if you are subject to the Alternative Minimum Tax (AMT), an IRS system created to ensure that individuals pay at least some minimum amount of tax, is to do an actual tax projection that will compute your regular income tax and the AMT. You will then know if you should accelerate deductions, or defer them. A CPA can help with tax projections as well as with other tax savings tips.

3. Review Your Income and Deductions: The most fundamental yearend tax move is to adjust the timing of income and deductions. If your income is high, putting off receiving more income at the end of the year can save taxes. For example, if you’re close to the line on itemizing deductions, accelerating payment of deductible expenses such as job hunting expenses or professional dues might save taxes. It should be noted that different itemized deductions are subject to different phase-out limits. For example, medical is subject to 7 ½% of adjusted gross income for regular tax purposes and 10% for AMT.

4. Postpone Income: If you are one of the lucky ones in line for a bonus, see if your employer will hold off writing the check until January. If you own a cash-basis business, you can time receipt of income by waiting until close to the end of the year to send your December billings. You can’t defer taxes by simply not putting a check in the bank. CAVEAT: If you expect to be subject to the Alternative Minimum Tax (“AMT”) consider accelerating income to the current year in an effort to mitigate the negative aspects of this tax.

5. Fund Your Retirement: Contribute to a deductible Individual Retirement Account (IRA) if you qualify. The investments grow tax deferred if it is a conventional IRA, tax-free if it is a Roth IRA. The Roth, however, is not deductible. You have until April 15 to open an IRA and make a deductible contribution for the prior year. If you have a 401K plan at work, make as large a contribution as you’re allowed to make. The self-employed have alternative retirement plans to consider but some of them must be opened by December 31st. This money can grow to a substantial sum because it is compounded over time free of taxes. To maximize the growth of your annual IRA contribution always make it at the beginning of the year. Remember that there are different maximum amounts to be contributed depending on whether you are over/under 50-years-old.

6. Pay Deductible Expenses before December 31: Paying your state income tax estimate before December 31 accelerates your federal deduction. You can also pay property taxes early, make an extra mortgage payment (the interest portion is deductible), pay your tax preparer for your yearend planning meetings or opt to have dental work or elective surgery before the end of the year. However, see the discussion of AMT which precedes. If you are short of cash use a credit card. This is the same as using cash so the deduction is taken in the year the charge is incurred rather than the year you pay off the credit card balance.

7. Contribute to Charity: You can make cash contributions or charge them on your credit card and take a current deduction. If you give appreciated property to charity, in many cases you’ll get to deduct the full market value. You may need an appraisal to determine the value of some property.

8. Consider Gifts to Children: For those taxpayers fortunate enough to be able to make gifts to children (or other relatives), do it well before December 31st so that the check clears. Gifts up to $12,000 per person need not be reported. In fact, you can gift $12,000 in December and another $12,000 in January (the 2007 gift) for a total of $24,000 over the two months. If you skip making the gift this year (2006), there is no looking back. Each year stands on its own.

9. Offset Capital Gains: Review your investment portfolio to determine whether you should sell some losers before yearend in order to offset capital gains you’ve already realized. Capital losses are first netted with capital gains and then are deductible against ordinary income (limited to $3,000 a year).

10. Married or Not: If you are considering marriage, consider the tax effects of getting married in December as opposed to January. You are considered married for the entire year even if you get married on December 31st. Your new spouse’s income, or lack thereof, should be considered when doing any tax projections because the net effect can be significant. Many of the calculations in any income tax return are driven by the taxpayers’ marital status.

For further tax and personal finance tips, visit the Sound Advice section of the Society’s website, www.nysscpa.org.

About the NYSSCPA

Representing 30,000 CPAs, the New York State Society of Certified Public Accountants (NYSSCPA) is the oldest and largest state accounting organization in the nation.
Incorporated in 1897, the Society is a not-for-profit organization that seeks to establish and maintain high standards of integrity, honor, and character among certified public accountants. Its members are CPAs working in public practice, industry, government and education in a state that serves as the home of Wall Street and major financial institutions.

The New York State Society of CPAs is located at 3 Park Avenue, New York, NY 10016. To learn more about the Society call 800-633-6320 or visit the Society’s website at www.nysscpa.org.