Moves to consider in managing taxable income include asking an employer to defer a year-end bonus until January, delaying client billing until 2000 and splitting large distributions from individual retirement accounts in December and January. For example, pay January's home mortgage in December to gain interest for that deduction, and pay state, local or property taxes early, if possible. There are spending thresholds that must be topped to qualify for some deductions, so a taxpayer could make it over the limit by paying outstanding medical or dental bills early, as well as such things as job-hunting expenses and professional dues. In making these moves, beware of a trap known as the alternative minimum tax. Created to prevent the wealthy from escaping taxes through numerous deductions, the AMT is creeping up on people of average income because it was never indexed for inflation.
Investments are another area ripe for tax savings.
Stock and mutual fund shares held for at least a year can be donated to charity, erasing the capital gains tax that would be owed if they were sold. The full market value of the donated investment can then be deducted. On the retirement front, the IRS recently extended to the end of 1999 the deadline for people to convert traditional individual retirement accounts to Roth IRAs. All rights reserved.