Tax Tips to Lighten Your Load at the Last Minute
Posted December 28, 1998
RALEIGH — You only have two days to lighten your tax load for 1998. But two days is enough time to make a big difference.
The most obvious opportunity is to get your charitable contributions in before the stroke of midnight Thursday. But there are also some things you may not have considered.
It is the second busiest time of year for CPA Ben Micham and his office staff. He says among those looking for last-minute tax breaks are people rushing to convert IRAs to Roth IRAs.
Unlike traditional IRAs, Roth IRA contributions are not tax deductible, though all the earnings are tax free for those who qualify.
And 1998 offers a one-time benefit for conversions. Take a $10,000 IRA switch for example.
"So 1998 is the only year that you can spread that tax liability. Let's say you're in a 15 percent bracket. You got a $1,500 tax liability, so you have four years to pay that $1,500," explained Micham.
Micham says homeowners can pay lower taxes next April by accelerating certain expenses before Dec. 31.
"You know, you make 13 mortgage payments rather than 12 in one year, so you're going to get a little bit better benefit," said Micham.
He says the same strategy works for things like real estate taxes or medical expenses.
Micham also suggests deferring income by asking your employer to delay a paycheck.
"You know, if you're making a lot of money and it puts you in another bracket, ask if you can. It's a cash basis. If you normally get your check Dec. 30, get paid Jan. 1, and that puts it into next year," Micham said.
Micham says most larger companies may not be willing to delay a paycheck to help you defer income.
He also warns with two days left, do not rush into any tax strategies without sound advice.