Now is the time to begin your year-end tax planning

Personal Finance. By Katherine Vogt, AMNews staff. Sept. 11, 2006.

This is that time of the year when most tax experts say you should start thinking about your end-of-the-year tax strategies.

By starting to plan a few months before Dec. 31, you might buy yourself just enough time to adopt new tax strategies or strengthen existing plans to get your finances into shape. "The more you think about it in advance, the easier year-end becomes," said Dave Sadler, an accountant and financial planner with the St. Louis-based accounting firm Moneta Group LLC.

By fall, most self-employed physicians whose incomes vary with their practice revenues should have a pretty good sense of whether they are having a higher- or lower-than-average income year, tax experts said. That should enable them to decide whether they should be looking for deductions or trying to save those strategies for future years.

Strategies tend to fall into one of four major categories: making equipment purchasing decisions, changing your retirement plan, making charitable donations, and spending down some practice income.

Many tax experts will tell you to first consider making equipment purchases for your practice as one way to reduce your tax bite. A rule known as the Section 179 deduction may allow you to write off up to $108,000 in equipment and computer purchases for assets that were put into service in 2006, as long as the assets qualify, and your total asset purchases for the year did not exceed $430,000.

The law, passed in 2003, set a base deduction of $100,000, which has since risen incrementally with inflation. The deduction will be available again in 2007. However, it is set to expire in 2008 unless lawmakers intervene. So unless things change, physicians have less than two years to spread out their major equipment purchases to take advantage of this deduction.