SHOPPING FOR YEAR-END TAX BREAKS

You are at the mall, the lines are out the door, holiday jingles play overhead, and the first thing that comes into your mind is: “Hey, I’ve got to get my year-end tax-planning done!”

Well, actually, that is probably NOT what comes to mind at that moment – but perhaps it should be. After all, there are only a few more tax-planning days until year end, and nothing says “holiday bargain” better than a smart last-minute tax deduction.

The following is a quick “Shoppers Guide” of year-end tax strategies:

Buy - Take advantage of Section 179 and (if the Congress would put down the eggnog and pass the Tax Extenders Bill) bonus depreciation by purchasing business property or other property that results in significant upfront write offs. One year I bought a brand-new computer on December 31, went home, plugged it in and typed in the words “I love year-end tax deductions!” By typing those words I placed the property “in service” and was entitled to write off the full price of the new computer. True story.

Sell - The effective tax on capital gains is now as high as 25% at the federal level (20%, plus 3.8% NIIT, plus another 1.2% for the Pease Limitation) and another 5% in Massachusetts, so check your investment portfolio and see if you can “harvest” tax losses by selling loss positions. Remember, you can’t sell and then rebuy the same stock right away (you must wait 30 days to you repurchase) but you can buy a nearly equivalent stock right now. Sell Exxon and buy Chevron.

Give - Bring your old clothes down to the Goodwill and contribute them in kind. You can claim a deduction for the fair market value of the clothing, which is typically something between 5% and 20% of the purchase price, depending on the condition, quality and utility. (Donating a brand new wool sweater that you never wore is worth a significant amount; donating that cumberbund you bought for your cousin’s wedding -- not so much.)

Get - You can make a gift of up to $14,000 per person per year to children, grandchildren and sundry loved ones – and, if you don’t use it, you lose it, so use it. The Beatles song “Can’t Buy Me Love” never anticipated $14,000 checks from grandma.

Push - Push income into the next year, if possible. A client can mail you a check on December 30th and deduct the payment for that year, while you, on the cash method of accounting, can receive the check on January 2, 2015, with tax due on April 15, 2016. Tax planning of this nature is older than Santa Claus. Ho. Ho. Ho.

Pull - Pull forward into the current year every possible tax deduction. Pay your January 1st mortgage payment on December 31, pay the deductible expenses for next month

for your business or home office, write all your 2015 charitable contributions on December 31, 2014, buy your business that new computer or printer today. Don’t delay. Remember, at year end, next week is also next year.

The old saying is “A fool and his money are soon parted”. For the rest of us, we have to wait until April 15.

But a well-planned holiday tax-shopping spree, is a great way to ring in the New Year. Take the time, make the effort, and then this year go buy yourself the good champagne. You earned it.

Joseph B. Darby is a Partner in the tax department at Sullivan & Worcester, LLP. He focuses his practice on business and transactional law.