ISSUE #7
YEAR-END TAX PLANNING

It is not too early to start thinking about year-end planning. Advance planning can save you money on your taxes and reduce your stress level. By having everything ready ahead of time, you can get your tax return filed early and avoid last-minute deadlines. Here are some tips we think you will find useful.

1. Get Your Records Organized -- It is now time to get organized, so you have everything you need for your tax preparer. Set up a folder for medical receipts, one for charitable contributions and another for miscellaneous deductions, such as mortgage interest and property taxes. Make a fourth folder for all the tax forms and reports you will be getting early next year, such as your 1099s. This saves time and avoids delays.

2. Consider Bunching Your Deductions -- Try to get a handle on your tax liability for the year. Ask your tax preparer to take a look at your deductions before the end of the year. If you itemize your deductions, you may want to prepay some expenses this year that you would normally pay next year. In fact, you may even want to move some of your giving forward from next year to create a larger income tax deduction for yourself this year. Likewise, you may wish to wait and pay certain expenses next year, instead of paying them this year, if it will reduce your taxes. This type of planning may be especially useful for medical bills, which must exceed a ceiling before you can take any tax deductions.

3. Manage Your IRA Distributions -- If you have not yet taken your IRA distribution this year, request it well before the end of the year. This way, you can make sure your check will be issued before the end of the year, even if there are processing delays. Remember, if you are past age 70½, you must take a required minimum distribution from your IRA every year, or face a large penalty. If you have questions about your required minimum distribution, contact your IRA custodian or financial adviser.

4. Stock Losses and Gains -- If you own stocks or mutual funds that have dropped in value, you may wish to sell them and realize a capital loss. If you intended to sell the stock anyhow, consider doing so before the end of the year so you can claim a capital loss. You can use this loss to offset any realized capital gains. If your capital losses exceed your capital gains, you may use the excess to offset up to $3,000 of ordinary taxable income. Ask your tax preparer if this strategy will benefit you, but you must do it before the end of the year.

5. Gifts of Stocks -- Highly-appreciated stocks and mutual fund shares can make great charitable gifts because you can deduct the full market value and pay no tax on the capital gains. However, you must transfer the shares directly to the charity. This transfer process can take anywhere from a couple of days to a few weeks. Call the charity well ahead of time to set the transfer in motion, so it can be completed by the end of the year. With a gift of stock, your charitable deduction is the average of the high price and the low price on the day of transfer. Consider a life-income gift. Ashland University offers a variety of life-income plans to fit your needs. You can make a gift now, obtain tax benefits and receive income for the rest of your life.

6. Charitable Donation Receipts -- The IRS requires you to be able to document all charitable deductions and to have a written receipt for any donation of $250 or more. If you did not receive a receipt for a donation you made during the year, call the charity to request a duplicate receipt. Many charities will also provide a summary of your donations during the year, if you request it. If you made any non-cash gifts with a value of $500 or more, you must file a form 8283 with your tax return to claim a deduction.

7. End of Year Donations -- Many people make charitable donations at the end of the year during the holiday season. If you mail a check, make sure it is postmarked by December 31st. The postmark date is the date of your gift for tax purposes. If you make a gift by credit card, the date of your gift is the day you charge it, even if you actually pay the bill in the following year. Using a credit card is a simple and convenient way to make year-end gifts.

This publication has been prepared as an educational resource to help the reader identify areas of potential concern. The publisher is not engaged in rendering legal, accounting or other professional services. The information contained in this publication should not be acted upon without first obtaining the advice of a professional adviser. 2004 © Florida Philanthropic Advisors, LLC. Material may not be used without permission.

Our planned giving director, Paul Ditlevson, can be of tremendous service in helping you integrate your giving goals with your overall estate plan. He can also help you prepare to visit your attorney. You can reach Mr. Ditlevson by calling 419-289-5090 or by email to pditlevs@ashland.edu or regular mail at 401 College Avenue, Ashland, OH 44805.