It's not too early for '83 tax moves
It may seem like rushing the season a bit, but tax advisers point out there are several moves you can make now to have a smaller tax bite when you file your 1982 forms next year.Skip to next paragraph
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The major tax bills passed by Congress in the last two years - the Economic Recovery Tax Act of 1981 and the Tax Equity and Fiscal Responsibility Tax Act (TEFRA) of 1982 - both contain provisions that make it worthwhile for many to make some tax-related moves now.
The most significant strategy is a holdover from last year: Take deductions in 1982 and try to push extra income into 1983. Generally, taxpayers should avoid uneven year-to-year income flows to get the most benefit out of graduated tax rates. But with the third phase of the three-year tax-cutting program still scheduled for next July, any income you get next year will be taxed at a lower rate.
One possible saving could come from making early payments on items that are deductible from federal income taxes, such as state or local taxes or property taxes. In some states, you can estimate these taxes and make early payments on them before the end of this year.
If you're considering any charitable contributions, think about making next year's donation this year. You'll get the deduction now and the charity will have use of the money longer, which is particularly helpful if it keeps the money in an interest-bearing account.
If you haven't already, you might consider setting up an individual retirement account or making an additional voluntary contribution to your employer-sponsored retirement plan. You can open or add to an IRA up until the time you file the 1982 return, which could be as late as April 15 of next year.
One thing to remember about making early payments, however, points out Steven Severin, a tax partner at the accounting firm Touche Ross & Co., is their possible ''opportunity cost.'' In other words, any potential tax savings from early payments could be more than offset by the fact that you no longer have the money to invest elsewhere.
As for income, take it next year if you can. If you can get your employer to defer any year-end bonuses until after New Year's, they will be taxed at a lower rate. If you own certain types of public utility stock, consider reinvesting the dividends rather than accepting cash. Up to $750 ($1,500 for joint returns) of dividend income reinvested in the common stock of a qualified public utility can be excluded from your income.
If you own a small business and use large capital items - like a car - exclusively for business use, consider making big-ticket purchases this year. TEFRA changed the rules about depreciation, making it harder to write off the cost of these items after this year.
Before TEFRA, for instance, a business could buy a $1,000 machine, take a 10 percent investment tax credit, and write off the $1,000 purchase over five years. Now, that write-off is reduced by one-half of the investment tax credit, meaning that only $950 can be fully depreciated. In a business with hundreds of computers, copiers, presses, and other machines to multiply this equation, this change can be significant.
A car, incidentally, will become even less attractive as a business expense next year, because the investment tax credit on business automobiles is being cut from 10 percent to 6 percent.
Another important change may affect how much you pay for casualty insurance. Before TEFRA, you could deduct unreimbursed casualty losses to the extent each loss exceeded $100. Beginning in 1983, however, only losses exceeding 10 percent of adjusted gross income will be deductible. Thus, says Warren R. Cox, senior financial planner with Prescott, Ball & Turben, a Cleveland brokerage firm, taxpayers may want to review their deductibles, now that the government won't be covering as much of their losses.
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