Net Gains: Increase Your Tax Refund Now

Dec. 5, 2007 — -- Put away the list, and forget about holiday shopping for just a day or two. It's time to focus on an issue that can actually make a positive impact on your finances as we enter the waning days of 2007.

Yes, it's time to talk taxes.

End-of-year tax planning hardly triggers warm holiday thoughts, but it can make up for some of what you will spend over the next few weeks.

With that goal in mind, here are some steps you may want to take before this year comes to a close:

Buy the software now. If you use software like TurboTax or H&R Block's Tax Cut to prepare your tax returns, consider buying it now. The 2007 versions are available and can be updated online to accommodate any last-minute tax law changes Congress makes.

Buying the software before the end of the year allows you to see where you stand while there is still time to make a difference. Use it to project your income for the year, review your withholding payments and total potential deductions.

At this point, it is difficult to complete a detailed return, but a rough outline can be quite helpful to identify steps you might want to take.

"If you're going to be doing some year-end planning, it's best to buy the software now," said Justin Ransome, a partner in the national tax office of Grant Thornton LLP.

And if you buy the software before year's end, the cost may qualify as a miscellaneous itemized deduction on your 2007 return.

Accelerate deductions and defer income. This is standard tax-planning advice that has gotten more complicated as more taxpayers than ever are subject to the Alternative Minimum Tax.

The general advice is to lower your 2007 tax bill by prepaying deductible expenses before Dec. 31 and trying to defer income until after the first of the year. This works well particularly for business owners who can control when expenses are incurred and possibly hold off on billing.

Along with business expenses, other deductions that can be accelerated include charitable donations, state and local tax payments and mortgage interest payments.