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Prepare your 2008 year-end tax checklist

There are many tax planning strategies to employ before year end. Take the time to discuss ways to save with a tax professional and your financial adviser over the coming weeks.

Here are some items that should be on your list:

n Consider taking capital losses to offset realized capital gains.

nLet your tax adviser estimate your adjusted gross income and tax rate and determine now if you have an AMT liability for 2008. If so, you may consider accelerating taxable income and or defer deductions.

n Ask your financial adviser for help rebalancing your portfolio to remain in line with your goals, time horizon and risk tolerance.

n Ask your financial adviser about matching up the sales of any securities that have losses to potentially offset some of the capital gains you may owe, and how to comply with wash sale rules.

n Fully fund your IRA and company retirement accounts as soon as possible.

n If you are age 70 1/2 or older, don’t forget about taking a required minimum distribution from your traditional, SEP or simple IRA for 2008. If you have these retirement accounts at Smith Barney, your IRA statement will show the amount you need to withdraw.

n If you would like to make a tax-free donation of your RMD, up to $100,000, to your favorite qualified charity, act now so we can make the transfer before year-end.

n If you want to use appreciated stock to make a charitable donation, do so by year-end to qualify for a potential income tax deduction. You can also arrange to contribute appreciated stock to a donor-advised fund.

n Talk to your financial adviser about gifting up to $12,000 per child to a 529 College Savings Plan. If you have UGMA or UTMA accounts set up for a child, find out how you can transfer these funds to a 529 account for greater tax benefits.

n If you own a business, establish a qualified retirement plan by Dec. 31, 2008 to be eligible for a contribution for this year.

n Talk with your financial adviser about developing a borrowing plan to cover your tax obligations — one that helps to unlock value in the assets you own, without liquidating those assets or using cash.

n Complete any gift transfers by year-end to reduce your estate and to feel good. You are entitled to transfer up to $12,000 per recipient in 2008 without incurring any federal gift tax, while spouses together may donate up to $24,000 per recipient. These annual gifts may be in addition to any direct tuition or medical payments made on behalf of another person.

n Use any balance in your flexible spending account for qualified medical expenses for 2008. When estimating your contributions for next year, consider the increasing costs of uncovered medical expenses. Average premium and out-of-pocket costs for health coverage are projected to increase by nearly 9 percent in 2009, to $3,826 per year. Year end tax planning is an important component of any financial plan. Take the time to see if any of these alternatives can benefit you.

Nancy Marciniak is a financial adviser located in Sarasota and may be reached at 364-7475.

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