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October is Tax Time? October 16, 2007 By Scott Whittemore It was probably only six months ago you filed your tax return (or an extension), so the last thing anyone wants to think about again is taxes. However, if you want to try minimizing the damage next April, it makes sense to check your year-end tax situation now to make sure you have done everything you can by December to prepare for April. AMT is coming. It is estimated as many as 23 million tax payers will have to pay alternative minimum tax (AMT) in 2007, up from 4 million in 2006. Unfortunately, many Quantum clients will be among the millions. Even though Congress approved a one-year Band-Aid last year intended to prevent 15 million new taxpayers from getting hit by the dreaded alternative minimum tax in 2006, it is up in the air if Congress will address the issue for 2007. We will keep our eyes on this issue. AMT effectively blocks deductions of state and local taxes, home equity loan interest (unless they used the money solely for home improvements), personal exemptions, or other potential deductions. Any of the following factors besides income could trigger the AMT based on their size and amount: State and local taxes paid Deductible medical expenses Capital gains Miscellaneous itemized deductions The bargain element of stock options Are you in the AMT? Do a quick tax planning review with Quantum to see if you are impacted and if there is anything you can do to minimize the impact. After the review, we may identify some actions to take: Do the opposite of normal tax planning. Instead of deferring income and increasing deductions, you will want to look at accelerating income and delaying deductions. You may want to defer taking some of those targeted deductions. Sell some losers. Quantum will do a portfolio and tax review to see if it makes sense for clients to peddle some underperforming investments in taxable accounts to offset capital gains for the year. Give to charity. Charitable donations are still usable deductions under AMT. Both cash and property donations can be deducted for the current year and next —this can be particularly effective for those whose charitable deductions already exceed income limitations. If you are not in AMT, there are other actions to look at: Defer income, raise deductions. Make sure you've reviewed all deductions you’re eligible to take while looking for opportunities to defer income into 2007 to save money on taxes. Likewise, see if you can push your annual bonus into next year to cut 2006's tax bill. Write some checks early. You may benefit by paying next year's quarterly state and federal tax early and see if they can squeeze in their January mortgage payment before Dec. 31. That means more deductions in 2006. Give to charity. If you are 70˝ or older, you now can make tax-free distributions of up to $100,000 a year from their IRA directly to a charity. For a quick October tax review with Quantum, call or email Scott Whittemore at (415) 927-8430 ext. 112 or swhittemore@quantumcap.com.

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