NEW YORK, Nov. 6 /PRNewswire/ -- Harvesting investment losses, increasing
college savings-plan contributions, and taking advantage of enhancements in
retirement planning accounts are among the year-end strategies taxpayers
should consider--between now and December 31--to reduce their 2002 tax bill,
advises KPMG LLP ("KPMG"), the accounting and tax firm.
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"While effective tax planning takes place year-round, it becomes
especially important at year-end when taxpayers still have time to make moves
that will result in savings on their annual tax bill," said Jeffrey Eischeid,
national partner in change of the Personal Financial Planning unit of KPMG's
Tax practice. "This year, with many new cuts having been phased in as a
result of the 2001 Tax Act, taxpayers have many more tax-saving opportunities
than last year. They should make sure they are familiar with the new benefits
and take advantage of those appropriate for them."
The following is a list of 12 tax-planning strategies and tips, offered by
the Personal Financial Planning unit of KPMG's Tax Practice, that should be
considered before December 31, 2002:
1. Think about harvesting your investment losses in the stock market.
Review your stock portfolio to determine if it's advisable to
recognize capital losses to offset capital gains. Also, keep in mind
that a net capital loss of up to $3,000 can offset ordinary income.
2. Consider turning your stock market loss into a charity gain, if you
have stocks that decreased in value this year. By donating proceeds of
the loss to charity, you can claim a capital loss and a charitable
3. Take advantage of the new contribution limits for both traditional
IRAs and Roth IRAs, which increase to $3,000, up from the long-
established $2,000. If you're 50 or older, you can make that $3,500,
under new "catch-up" provisions.
4. Enhance tax-savings opportunities through contributions to a 529
college-investment plan or a Coverdell education savings account.
Coverdell accounts -- formerly called Education IRAs -- have undergone
a major expansion with contribution limits raised by $1,500 to a new
limit of $2,000, higher income-eligibility limits for married couples,
and withdrawals allowed for pre-college expenses. With 529 plans, many
states give residents a tax deduction and distributions are tax-free,
if used for qualified higher-education expenses.
5. If you're financially able, consider establishing a gift-giving
program for children and grandchildren to take advantage of the
tax-exclusion increase. This year, certain individual gifts of up to
$11,000 per recipient have no gift and estate taxes, up from $10,000
last year. You may give as many individual gifts as you like and, if
married, so may your spouse.
6. Give particular thought to charitable contributions. To enhance the
value of the contribution, confer with your tax professional to
determine if the contribution should be made in property or cash.
7. If you have self-employment income, start a Keogh plan by December 31,
2002. Much like an IRA, these tax-deferred savings plans allow annual
contributions of up to $40,000, which can be deducted from personal
8. Enroll in an employer-sponsored dependent care program to earn federal
tax-exclusion benefits of up to $5,000 and/or a medical expense
reimbursement plan, which allows employees to use pre-tax dollars for
medical bills not covered by their insurance.
9. Learn about the Alternative Minimum Tax (AMT), which will affect more
taxpayers beginning this year. Meet with your tax adviser or invest in
income-tax software (unless you are intimately familiar with tax law
and comfortable with higher math) to determine what normal deductible
expenses will either not be deductible at all or only partially
deductible. Be especially sensitive to the AMT if you live in a
10. Pay the final installment of state-estimated tax by December 31, 2002
to receive a deduction for this year, rather than 2003. But be aware
of possible AMT ramifications.
11. Accelerate deductions into this year by prepaying some of next year's
deductible expenses, and defer income, where possible, until next
year. This can work particularly well for self-employed individuals
and others who have some degree of control over when they get paid.
12. If you are one of the many individuals who experienced a job loss in
2002, tally up all job-search-related expenses. You may be eligible
for a deduction if your expenses exceed 2 percent of your adjusted
KPMG has thought leaders in the Personal Financial Planning unit of its
Tax practice who are available for interviews on year-end tax planning
strategies. Among them are: Jeffrey Eischeid, national partner in charge
(Atlanta); William J. Goldberg, partner and Southwest area leader (Houston);
Dennis Ito, partner and Western area leader (San Francisco); Rusty Jandl,
partner and Midwest area leader (Kansas City); Katherine Pace, partner and
Southeast area leader (Orlando); Neil Tendler, partner and Northeast/Mid-
Atlantic area leader (Short Hills, N.J.); Brent Lipschultz, senior manager
(New York), and Justin Ransome and Ralph Pike, senior managers (Washington,
D.C.). To schedule an interview, contact Bob Nihen at KPMG LLP, 201-505-3419.
KPMG LLP is the accounting and tax firm that understands business,
particularly the distinctive needs of market leaders. The firm offers clients
a powerful combination of people, products, technologies and results-oriented
strategies to help them meet their challenges and improve performance. The
fastest-growing Big Five firm, KPMG is uniquely positioned to help clients
strengthen their position in changing marketplaces. KPMG LLP (www.us.kpmg.com)
is the U.S. member firm of KPMG International. KPMG International's member
firms have 103,000 professionals, including 6,500 partners, in 152 countries.
The information contained herein is general in nature and based on
authorities that are subject to change. Applicability to specific situations
is to be determined through consultation with your tax adviser.
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SOURCE KPMG LLP