such high-tech computer gear as servers and mainframes. “We’re under the $200,000 limit, so any year-end equipment purchases can be deducted,” says Brown. He’s also making sure that all outstanding bills are paid by year-end, so they can be written off in 2000.
If you are in your 70s (or if you help your aging parents with their finances), you have added year-end concerns. Once you reach age 70 1/2, you’re required to withdraw certain amounts from your IRA and other tax-deferred plans each year. Any shortfall will be subject to a 50% penalty tax, so check with your tax professional to make sure that you’re withdrawing enough. (If you reached 70 1/2 in 2000, you aren’t required to take your first distribution until next April 1. However, you might want to take your first distribution this year; if you take two required distributions in 2001, the added income may push you into a higher tax bracket.
If you have already begun taking minimum distributions, you must take your 2000 withdrawal by December 31, based on the amount you had in your IRA at the end of 1999.
All of this my seem a bit taxing on the brain. But year-end tax planning is certainly worth it. It is the best investment you can make when it comes to sidestepping any penalties, and at the same time it will put you on the path to slashing your tax bill come April 15.
10 WAYS TO MAKE LIFE LESS TAXING
Year-end Tax Savings Tips You Can Take Advantage of Before January 1
1 Bunch itemized deductions into 2000.
2 Increase retirement plan contributions.
3 Open a Keogh plan if you are self-employed.
4 Take capital losses to offset capital gains.
5 Donate appreciated artwork or stock to charity.
6 Spend the remainder of your flexible spending account.
7 Defer all taxable events until 2001 if it will enable you to avoid paying the alternative minimum tax.
8 Avoid penalties incurred by not paying enough in estimated taxes.
9 Convert a traditional IRA to a Roth IRA if your income does not exceed $100,000.
10 Defer income from commissions or bonuses if you can.