As the end of the year approaches, it is a good time for you to engage in tax planning, which will be more challenging than usual because of uncertainty over whether and how Congress will extend alternative minimum tax relief to avoid millions more becoming subject to it in 2007, and whether Congress will extend a number of important tax breaks expiring at the end of 2007.

We have compiled a checklist of actions that may help you to save taxes if you act before year-end. Not all actions will apply in your particular situation, but you will likely benefit from many of them. We can narrow down the specific actions that you can take once we talk with you and tailor a particular plan. In the meantime, please review the following list and contact us at your earliest convenience so that we can advise you on which tax-saving moves to make:

• If you have any capital gains or losses from sales of stock or other capital assets or you have stock or other capital assets that are ripe for sale, it may be advisable for us to meet to discuss how you can best coordinate timing your gains and losses to minimize tax on your gains and maximize the tax benefit from your losses.
• If you or a family member are thinking of selling appreciated stock or other capital assets, and your (or their) income isn't taxed at a rate higher than 15%, it may pay to hold off on the sale until 2008. That way you may pay a zero tax on the gain; If you sell this year, you will pay a 5% tax on the gain.
• If you have appreciated publicly traded stock that you have held over one year, you may be able to use this stock to make charitable contributions. You may be able to get a tax deduction for the value of the stock, without recognizing the long term capital gain as income, subject to certain limits based on your income.
• If you own an interest in a partnership or S corporation you may need to consider taking action to increase your basis in the entity so you can deduct a loss from it for this year.
• Self-employed individuals should consider setting up a self-employed retirement plan before year end. If you are an employee, you should consider participating in an employer sponsored retirement plan or setting up your own retirement plan.
• Increase the amount you set aside for next year in your employer's health flexible spending account If you set aside too little for this year. Don't forget, you can set aside amounts to get tax-free reimbursements for over-the-counter drugs, such as aspirin and antacids.
• If you are receiving Social Security benefits, there are a number of steps you can take to reduce or eliminate tax on your benefits.
• Those facing a penalty for underpayment of estimated tax may be able to eliminate or reduce it by increasing their withholding.
• You may want to pay a portion of contested property taxes to be able to deduct them this year while continuing to contest them next year.
• Consider using a credit card to prepay expenses that can generate deductions for this year.
• You may want to settle an insurance or damage claim in order to maximize your casualty loss deduction this year.
• You may be able to save taxes this year and next year by applying a bunching strategy to “miscellaneous” itemized deductions, medical expenses and other itemized deductions.
• In 2007, certain itemized deductions may be reduced by 2% of your adjusted gross income. Thus, you may be able to benefit from deferring these deductions into 2008 when the reduction is 1% of your adjusted gross income. These rules are complex since other limitations may apply.
• Consider planning for the alternative minimum tax since certain itemized deductions such as real estate taxes, state income taxes, sales taxes, and miscellaneous itemized deductions are not deductible for purposes of calculating this tax.
• Make sure you save your receipts for charitable gifts. Beginning in 2007, you are required to have a cancelled check, bank record or receipt for all cash gifts. For gifts in excess of $250, additional substantiation is required.
• If you are considering a donation of a qualified conservation easement, there may be a benefit of accelerating this contribution into 2007 due to beneficial provisions which are scheduled to expire at the end of 2007.
• If you are age 70 1/2 or older, and own IRAs (or Roth IRAs), and are thinking of making a charitable gift before year-end, arrange for the gift to be made directly by the IRA trustee. Such a transfer can achieve important tax savings, but it won't be available after 2007 under current law. The amount cannot exceed $100,000 and must be distributed to a qualified charity.
• If you're thinking of donating a used auto to charity, there are recent changes on substantiation requirements and the amount of tax deduction that you will receive.
• If you have personal loans that are generating nondeductible interest expense, you may want consider a home equity loan. This may enable you to deduct the interest expense.
• This year, the kiddie tax rules apply to children under age 18; next year they will apply to most children age 18 and most full time students ages 19 through 23. If your child holds appreciated stock, and isn't subject to kiddie tax this year but will be in 2008, consider having him or her sell the stock this year. In many cases this will result in a 5% tax on the gain, instead of 15% If the sale is postponed until next year.
• If you are contemplating marriage, consider the impact on your tax planning. For example, you may want to consider a marital agreement.
• If you are contemplating divorce, consider the impact on your tax planning. You will want to make sure that your divorce agreement has considered tax issues that may exist now or may arise in the future.
• If you are thinking of making energy saving improvements to your home, such as putting in extra insulation or installing energy saving windows, consider doing so before year end in order to qualify for a tax credit that may not be available after 2007.
• If you are thinking of buying a hybrid vehicle eligible for a tax credit, purchase it before year-end after confirming that the particular model still qualifies for the credit.
• Depending on your particular situation, you may also want to consider deferring a debt-cancellation event until 2008, electing to deduct investment interest against capital gains, and disposing of a passive activity to allow you to deduct suspended losses.

• Texas has a new margin tax. The entities subject to this tax now include certain trusts and partnerships, as well as entities that have been subject to the Texas franchise tax. There may be steps that can be taken before year end to reduce this tax liability.
• Business clients also should consider making expenditures that qualify for the $125,000 business property expensing option.
• Self-employed individuals should consider setting up a self-employed retirement plan before year end. If you are an employee, you should consider participating in an employer sponsored retirement plan or setting up your own retirement plan.
• You may want to settle an insurance or damage claim in order to maximize your casualty loss deduction this year.

• You can save gift and estate taxes by making gifts within the annual gift tax exclusion before the end of the year. You can give $12,000 in 2007 to an unlimited number of individuals but you can't carry over unused exclusions from one year to the next.
• You can also save gift and estate taxes by making gifts for tuition and medical expenses directly to the educational institution or the medical care provider.
• If you haven't reviewed your estate plan recently, you may benefit from updating this plan to fit your current family situation. Remember, in addition to a valid will, you also need to consider beneficiary designation forms and other ancillary documents when reviewing your plan.