Do you feel you paid too much income tax for 2006? Now is the time to take steps that will reduce your 2007 taxes, your tax bill for 2008. Here are some ideas:

Maximize Your Deductions

In general, people who itemize deductions should pile up as many deductions as possible.  In some cases, careful timing of deductible expenses can augment your deductions for medical payments, miscellaneous expenses (professional dues and subscriptions, financial and tax consulting fees, for example) and retirement plan contributions. Charitable gifts, however, are by far the easiest, most flexible way to increase deductions in 2007.

Every gift you make by December 31, 2007 will generally be deductible up to 50% of your adjusted gross income, if you "itemize.” Excess deductions can be carried over and deducted in future years. A $1,000 contribution saves $350 for a person in the 35% tax bracket, $250 for someone in the 25% bracket. Tax savings are not the reason friends support the American Red Cross, of course, but they do enable our supporters to do more than they might have thought possible. Donors who make annual charitable gifts might want to accelerate their 2008 contributions into late 2007, doubling this year's tax benefit. “Borrowing” deductions from next year may enable people who take the “standard deduction” to itemize.

Give Appreciated Securities

If possible, friends of the Red Cross should make their gifts with stocks and bonds in which they have a large paper profit (long-term capital gain). The profit escapes tax and the charitable deduction will be the investment's full fair market value, if held more than one year. Note: Gifts of securities may be deducted up to 30% of your adjusted gross income, with a five-year carryover for excess deductions.

Other assets that have gone up in value may make good gifts, including stock in closely-held corporation and real estate. Remember that the date of delivery of gifts to charitable organizations is the test of whether a gift will be deductible for 2007. A check will be considered delivered, however, on the date you mail it -- even as late as December 31, 2007. The same rule applies when you mail securities in the proper form.

Postpone Taxes As Long As Possible

You can defer some 2007 income (and any income tax) to future years through a qualified retirement savings plan (your company's 403(b) or 401(k) plan, for example, or an IRA).  U.S. savings bonds sometimes defer reporting of interest until the bonds are cashed. If you plan to sell property, ask your advisers about using an installment sale that postpones some of the tax. Professionals might bill clients in early 2008 rather than late 2007. We also can show you how a contribution to the Red Cross can provide a lifetime income - with the option to defer your income until a future year, (for example, when you plan to retire).

Convert to Low-Tax Investments

People in high tax brackets should consider shifting from fully-taxed, interest-bearing accounts into investments that produce tax-exempt interest or long-term capital gains and qualified dividends, that are taxed at a top rate of only 15%. You can make such a switch, and also qualify for significant charitable deductions, through any of several gift arrangements we have available.

Make a Gift, Increase Your Income

It's December 2007 and Joan (who is in the 35% tax bracket) is looking for additional tax deductions. Joan has some stocks and bonds she could use for a charitable contribution but doesn't feel she can afford to give up any income right now. One solution is to transfer her securities to a trust that will pay her a specified income for life, with the property benefiting the American Red Cross when she dies. Joan receives a charitable deduction on next April's tax return for a large portion of what she puts into the trust. And the trust is arranged so that her income is actually higher than before her gift.

We Can Assist You

Feel free to call Marco Brehm at 1-877-RED-CROSS, ext. 2119 with any questions on planning year-end contributions, especially gifts of stocks or mutual funds. You can also email by clicking here Brehmm@nyredcross.org.

Thanks for your support and Happy New Year from the Red Cross!