Ways to Save on Your 2006 Taxes

Well, it's about that time of year again -- time to start thinking of compiling all those receipts, forms, records and the like and start working on completing your tax return. But before you start that in 2007, there are steps you can take now that could lower your bill come April 15. Here are thoughts on some easy ways to save on your taxes from Money Central:

• Charitable deductions.
• Use up your flexible spending account (FSA) dollars.
• Make your Jan. 1, 2007, mortgage payment on Dec. 31, 2006.
• Pay your taxes early.
• Medical and miscellaneous deductions.
• Maximize your pension or IRA contributions.
• Make those $12,000 gifts -- if you need to.
• Make the most from capital gains and losses.

My thoughts on these:

1. If you're going to make a huge contribution in January, why not do so in December? It could save you money this year -- then you have 12 whole months to work on how to save on next year's taxes.

2. Like they say, this isn't really a tax savings tip, but it's a reminder to spend all the money you set aside in FSAs.

3. I don't have a mortgage, so I can't take advantage of this tip. But as I've said previously, paying your mortgage early is a great way to save on taxes.

4. Even though I don't have a mortgage, I do have real estate taxes. And while my winter bill is due in February, I pay it early every December to get the current year write-off.

5. If you're close to hitting the amount you need to be able to deduct medical expenses, then pile as many expenses as you can into the year to max out your expenses. The opposite is true as well. If you're expecting 2007 to be a costly year regarding medical expenses, try to delay this year's costs into 2007 to get the number you can deduct as high as possible.

6. I have my 401k set up to automatically contribute the maximum every year.

7. If you want to, I'm accepting all $12,000 gifts FMF readers would like to send me. ;-)

8. I look over my investments every year at this time and decide whether or not to sell. I wouldn't sell an investment just for tax purposes, but if I needed to offset gain and at the same time wanted to ditch an investment, then I'll sell.

Comments

[Dus10]

I actually contacted my mortgage company to see about paying early. We have our mortgage paid via ACH every month on the 1st, but it actually gets pulled on the 3rd. I asked if I could get them to move it, one time only, to be at the end of December, but not before December 29th, since that is when my direct deposit goes in to the bank.

The representative said that could schedule it early, but it would be based off of the 14 day grace period, and as such, would come out on December 15th, even though we have already paid December's note. I asked her then if I could just cancel the ACH program and send her a check, and then start the ACH again for February's payment (even though I plan to refinance before then). She said that was fine.

At that point, I asked the representative about what year the payment would be applied, for tax purposes, if we send the check on December 28th, and it does not arrive to them, based on the weekend and New Year's holiday, until January 2nd or later. She said that no matter when I pay it, it would be applied for 2007, and that she had never heard of people making a payment early to write the interest off for a different year. Obviously, she has been living under a rock, or she is just incompetent at her job, or both.

I am going to call back again, to see if I can speak with someone else, and maybe even a supervisor.

[makingourway]

Dus10, the lady you called sounds like she has been poorly trained. I've been making and benefitting from early mortgage payments for years.
Regards,
makingourway