Although investors have to wait until the new year to purchase some funds to avoid capital gains taxes, these funds avoid that risk by definition, she said. Retirees, meanwhile, should consider splitting up large distributions from their employers, taking a portion this month and the remainder in January, Luscombe said. Other workers, especially those in the top tax bracket, should consider using any flexibility they can to defer income, such as bonuses, into 2001 to lower taxable income, experts said, especially if we may be in line for tax relief down the road. Of course, you first should determine if doing that would thrust you into a higher tax bracket next year. The group also reminds donors that giving stock, rather than cash, to a favorite charity can net a double tax break.
Donors can take a deduction for the value of the stock, plus avoid paying tax on capital gains.
Entrepreneurs can charge deductible expenses on credit this week and next and take the deduction in 2000, even if they don't actually pay the bills until 2001, the group notes. And if you're planning to leave some of your shares under the tree for Junior, at least don't let him sell until after the New Year, Luscombe suggests. The plans, a pilot program created in a 1996 law, allow participants to deduct contributions and pay medical bills out of the accounts, which grow tax-free. But the program is set to expire at year-end, prompting a tenfold increase in enrollment in recent weeks, said Allen Wishner, chief executive of Flexible Benefits Corp., which offers the plans.