As the year 2008 comes to an end, it is once again time to optimize for next year’s tax return.  Here is an article I saw on dumblittleman that gives 9 year end tax tips.

Personally I do the following:

- clean out unwanted clothes for donation.  One thing to note, however, is that the rules for tax write off have changed.  Previously one can donate up to $250 worth of clothing and file on their tax returns without receipt.  However, the rules have been changed that you must have a receipt to write off any donated clothes.

- Contribute to 401k, Roth IRA and IRA.  Even though each one is different they can each work toward saving taxes.  401k is offered by an employer and the contribution is taxed differed until money is withdrawn.  IRA is similar to 401k with two exceptions: everyone can contribute to IRA and tax benefit of an IRA decreases when your income increases.  Personally I like Roth IRA the most.  It allows you to contribute after tax dollars but the earnings will not be taxed when you start withdrawing from the accounts.  (though it won’t save you taxes currently).

- Selling losing stocks to offset capital gains.  In a normal year everyone will have winning stocks and losing stocks in their porfolio if they diversified correctly.  2008 is one of the worse years in stock market history, but you will still need to sell your stocks in order to write off.  Personally I will write off $3000 worth of losses to met the limit allowed by the tax code.

- If you are planning on giving your love ones some money over the holiday, please note the limit for gift is currently $12,000 per year.  Anything above $12,000 will be deducted from your life time limit of 1,000,000.