The most basic form of year-end planning involves pushing tax bills into the future by deferring income into the next year and accelerating deductions into the current year. However, if 2007 has been a hard year, and your tax bill is likely to be smaller than next year’s, you might want to consider the reverse strategy. You could pull some income into this year and put off some expenses until January.

The bottom line is you must be aware of what this does to your tax situation for future years, as well as what it does overall if you are subject to the dreaded AMT. Some prepayments of expenses are not deductible for AMT, and the deduction will be wasted. Also beware of the AGI phase-outs of some of these common deductions. You don’t want to pre-pay an expense, only to find out that your AGI is too high to take it.

• If you itemize deductions, you can claim tax deductions in 2007 for your final Ohio, School District, and local estimated tax payment and the second property tax installment if they are paid by December 31, 2007. Be careful, because these items aren’t deductible for the alternative minimum tax, so you could lose your tax benefit. (A good reason to schedule a year-end planning meeting!) This also works with pre-payment of self-employment taxes, and you don’t even have to itemize!
• Consider paying medical expenses in December rather than January, if doing so will allow you to qualify for the medical expense deduction.
• Assuming you itemize, you could prepay deductible interest. Or if you have a student loan, you could pre-pay some of that interest, and you don’t have to itemize.
• Make alimony payments early.
• If you have big capital gains to report for 2007, consider selling “loser” investments before the end of the year to offset the gains.
• If you are age 70 1/2 or older, remember to take your required minimum distributions from IRA accounts and other qualified plan accounts, including 401(k) and profit sharing accounts. Remember you have a special election available for 2007 to have your distribution paid directly to a qualifying charity to avoid tax on the distribution. Be sure to get required documentation from the charity.
• To reduce your taxable income this year, consider maximizing your contributions to an employer- sponsored retirement plan such as a 401(k). You won’t be taxed on the contributions you make now, and you may be in a lower tax bracket when you do eventually withdraw the funds and report the income.
• If you qualify, you might also consider making either a tax-deductible contribution to a traditional IRA or an after-tax contribution to a Roth IRA. In the first instance, a current income tax deduction effectively defers income–and its taxation–to future years; in the second, while there’s no current tax deduction allowed, qualifying distributions you take later will be tax free. You’ll generally have until the due date of your federal income tax return to make these contributions.
• Consider making gifts of appreciated property before the year end. Remember that appraisals may be required. (Not required for donations of publicly- traded stock.)
• Donations paid using a credit card during 2007 will be deductible on your 2007 income tax return. Be sure to give the charity enough time to process your donation, so don’t wait until the last minute.
• If you have year-end deductible expenses (such as business expenses, medical expenses, miscellaneous itemized deductions, etc.), you can use your credit card to make the purchase this year, take the deduction this year, and pay your credit card bill next year. When you pay with a credit card, the IRS considers the expense deductible in the year that the charge is incurred, not necessarily when you pay the credit card charge. So if you have the right introductory credit card offer, you can use interest free money to create a tax deduction now. Just make sure you pay it when it comes due in 2008 because racking up credit card debt is not what we’re recommending here.
• If you have appreciated stock that you’ve held for more than one year, you might want to keep the cash in your pocket and donate the stock. You’ll avoid paying tax on the appreciation, but will still be able to deduct the full value of the stock.

These are just a few of the major year-end planning considerations, and should not be implemented without the help of a competent tax advisor.