Strategies for maximizing your deductions in 2008.
As we reach the close of a very troubling year for markets and the economy, astute investors need to use all the tools at their disposal to make the best of a bad situation and maximize their tax advantage. Here are some important end-of-year tax items we think are worth reviewing.
First, estimate adjusted gross income, for both 2008 and 2009
The time-honored strategies of accelerating deductions and deferring income need to be evaluated carefully; these are tied to adjusted gross income, and thus impact your ability to maximize itemized deductions related to gross income.
If you anticipate being in a higher tax bracket in 2009, you may benefit from accelerating income into 2008. If you expect your adjusted gross income to be higher in 2008 than in 2009, or you anticipate being in a higher tax bracket in 2008, you may benefit by deferring income into 2009. Be sure to consider the effects on Social Security; additional income may increase the rate of tax paid or the percentage of benefits taxed.