End of Year Tax Planning, What to Do with that Bonus?
December brings holiday cheer and the end of the 2008 tax year. Not exactly “visions of sugar plums dancing,” but certainly in the dreams of most adults as 2008 comes to a merciful close. How can you position yourself this month to maximize your 2008 tax savings? Let’s take a look at some opportunities to trim that 2008 tax bill or find smart places for that year-end bonus. Yes, according to a Towers Perrin survey, nearly two-thirds of US companies are still sending out their end-of-year bonuses. • Paying down mortgage debt. Making an early January payment in December or a lum sum payment against principle can give your 2008 tax bill a break. It can also be an alternative investment to a poorly performing stock market and historically low savings rates. With the Federal Reserve taking benchmark rates to nearly zero, CD, money market, and savings rates are paying very little return. Of course, with a fixed rate loan this is a short-term strategy to reduce taxes, but a long-term strategy
