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Friday, October 14, 2005

Year End Tax Planning

Some year end planning considerations to start thinking about -

A deduction for college tuition is scheduled to go off the books unless Congress extends it. You may want to prepay in 2005 tuition not due until early 2006 if that lets you increase your tax savings from the expiring deduction.

The Energy Tax Incentives Act of 2005 provides a new tax credit for making certain energy-saving improvements around the house. But the new credit is not available until 2006, so you may want to hold off on the improvements if possible.

On January 1, 2006, the deduction for buying a hybrid automobile converts to a tax credit that's probably more valuable to auto buyers than the deduction. So if you are thinking about buying a hybrid, you may want to delay your purchase until 2006.

The Katrina Emergency Tax Relief Act of 2005 allows some taxpayers to claim bigger charitable deductions than in the past because the Act lifts restrictions that limited the deductions. But it's only a temporary reprieve; the restrictions return after December 31, 2005. So, if the restrictions apply to you, you may want to consider accelerating your charitable donations from 2006 to 2005.

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