Little time left to cut '08 taxes

Real-estate taxes

If you pay your own real-estate taxes, make any payments due in the beginning of 2009 by Dec. 31. My fourth-quarter real-estate taxes are due Feb. 1. By paying them Dec. 31, I get the deduction a year earlier.

A friendly warning: Taxes aren't allowed as a deduction under the alternative-minimum-tax computation. If you expect to get hit by the AMT, don't prepay.

Medical and miscellaneous deductions

Medical expenses and miscellaneous itemized deductions have "floors." For medical expenses, only those in excess of 7.5% of your adjusted gross income count. Miscellaneous itemized expenses have to exceed 2% of your AGI to qualify.

An important point: Your health insurance premiums count so long as you're not paying them out of a flexible spending account.

If you're going to exceed the floor, accelerate your expenses. Prepay your orthodontist or your tax preparer. Send in your payment either online or via the U.S. mail by Dec. 31. Alternatively, if you're not going to exceed your floors, defer the deductions to 2009. You may exceed your floors then.

Pension or IRA contributions

These are especially important if you are self-employed. Unless tax rates shoot up, you want to pay your tax "tomorrow" rather than today.

If you're contributing to a retirement plan such as a 401(k) plan or a 403(b) plan, you can put in $15,500 in 2008 and $16,500 in 2009. If you're 50 or older, you can put in an additional $5,000 as a catch-up contribution in 2008 ($5,500 in 2009).

Cash gifts

Could your estate be taxed?

If so, lessen the burden on your heirs by making a tax-free gift of up to $12,000 before the end of the year. The tax free amount increases to $13,000 per recipient in 2009.

Tax-free IRA distributions to charities

If you're 70 1/2 or older and looking to make a donation to a favorite cause using funds from your individual retirement account, this may be the year to do it. For 2008 -- and 2009 -- you can distribute as much as $100,000 directly from your IRA without recognizing any income.

You don't get a charitable-donation deduction (unless the distribution was from a Roth IRA), but the distribution does count toward your minimum-distribution amount.

A note: This provision will expire after 2009 unless Congress renews it. (A renewal is a good bet, however.)

Is the AMT in your future?

I fully expect some relief from the alternative minimum tax. But if we don't get it, I encourage you to really yell at your representative and senators for not getting the job done.

More middle-income taxpayers are being hit with the AMT each year, which is basically a parallel tax system designed to ensure that everyone pays some tax. It is, however, forcing more people to pay more tax than it should.

• Talk back: What money moves will you make by Dec. 31?

This fall, Congress extended the AMT exemption, increasing the exemption for 2008 to $69,950 ($34,975 for married couples filing separately). That's up from $66,250 in 2007 -- or $33,125 for married couples filing separately. For singles, the limit is $46,200, up from $44,350 in 2007.

But the extension is good for 2008 only. Congress will have to extend it again in 2009.

Watch this carefully because the issue hasn't been resolved, and the lack of resolution could cost you.

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