- The Washington Times - Thursday, December 30, 2004

Today is the last day for taxpayers to use strategies that could give them deductions on their annual tax bills for the year.

“Accelerate deductions to the extent you have the ability to make those payments,” said Mark Steber, vice president of tax resources for the tax return preparation firm Jackson Hewitt.

The strategies include making a January mortgage payment today, donating to charity and paying outstanding business debts.

Taxpayers can defer their payments on the deductible amounts for weeks if they use checks or credit cards.

As long as a check is in the mail by midnight, the payment can qualify as a 2004 deduction even if it is delivered days later. Credit cards offer similar advantages.

“You’ve got 30 days to pay it, but you get the deduction immediately,” Mr. Steber said.

Tax returns should be no more difficult to prepare this year than in other recent years, said Nina Cunningham, spokeswoman for Virginia Beach-based Liberty Tax Service.

“There haven’t been any monumental changes,” Mrs. Cunningham said. “Things have been pretty easy to follow this year.”

Tax preparers offer other tips for maximizing last-minute deductions:

• Donate to charity. The devastating Asian tsunami this week offers an opportunity to do some good for others while reducing taxable income. However, Jackson Hewitt warns that the donations are deductible only if they are given to U.S. charitable organizations.

Today is the last day to make vehicle donations to charitable organizations and receive the most favorable tax consequences. In 2005, the law limits deductions to the amount of money that the charities collect from selling the vehicles. This year, taxpayers could deduct the estimated value of the car, which usually was a higher amount.

• Make medical and dental purchases. Taxpayers close to the 7.5 percent of their adjusted gross income threshold needed to claim a deduction could purchase a new pair of glasses, a wheelchair or other device to push them over the minimum expense limit.

• Make business and mortgage payments. Paying a January home mortgage bill today will allow the accrued interest to be deducted for the 2004 tax return. Deductions also are allowed for business-related payments, either on old debts or future debts.

• Pay off school expenses. An extra payment on a student loan or paying next semester’s college tuition today allows the amount to be deducted as an education expense for 2004.

• Take advantage of the sales-tax deduction. This year, taxpayers have an option under the new sales-tax deduction between deducting sales tax or state income tax from their federal returns. Most taxpayers in jurisdictions with high income taxes, such as Maryland, Virginia and the District, would receive the greatest benefit by deducting income tax.

However, people who owe little or nothing in state income tax should consider making major purchases today to receive a bigger deduction.

Examples include cars, motorcycles and recreational vehicles.

• Make a gift to a friend or family member. Gifts of up to $11,000 in 2004 can be excluded from the U.S. gift tax and be received tax-free by the persons receiving them.

Tax advisers said tax laws could change as soon as next year.

President Bush appears to have the support in Congress for his proposals to repeal the estate tax and make the tax cuts of 2001 and 2003 permanent. He also wants tax laws simplified to reduce taxpayers’ dependence on professional tax preparation services.

“That’s definitely what we’re working on,” said John Feehery, spokesman for House Speaker J. Dennis Hastert, Illinois Republican. “A complete overhaul of the tax code so people don’t have to spend all this money complying with our tax code.”

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