Tax planning is best done with plenty of time to consider all your options. Considering some of them after January 1st is OK if you're planning on something for next year. The time for 2007 is right now so that you can review all the issues and take action on a timely basis to minimize your tax liability. Here is some tax planning options to consider:

Take a loss on asset sales

You can sell a stock before the end of the year in which you have a loss. Please note that losses will offset gains to the extent the losses are greater than gains, up to $3000 annually may be offset against ordinary income. Any losses in excess of the limit may be carried over to future years. The maximum loss write-off, if married filing separately, is $1500. Study your portfolio, if you are holding something that will probably not appreciate, or you have an investment that is expected to do better, it could be sold with the loss taken and your taxable income reduced.

Plan your deductions

You may be considering borrowing additional funds or making additional charitable contributions that you will obtain additional deductions. Be sure to determine if you can really consider these additional expenses as itemized deductions. The standard deduction in 2007 for a single person is $5,350 and $10,950 for married couples. If the amounts are in excess of these stated amounts will you be able to itemize the deductions. You may group charitable deductions to take advantage of them this year rather than next year. Similarly, if you are considering refinancing, and if you are paying points, consider whether you should close on December 31st or January 2nd in order to determine the most beneficial year for you to consider taking the itemized deduction of these points.

Maximize your retirement contributions

By depositing funds in an IRA or contributing to your 401(k) through work you are reducing your taxable income. Be sure you are maximizing your contribution to earn the greatest employer match. The benefits being the income on assets in the IRA or qualified plan are deferred until the withdrawal is made. These assets will continue to increase in value, with all gains, income and appreciation being deferred until a withdrawal is made from the account. If these funds are not needed for ongoing expenses, and if you are still working, you should strongly consider depositing funds to an IRA as opposed to merely a CD or savings account. The limit for 2007 is $4,000 for a single person and $8,000 for a couple or $5,000 for a single person if over 50 and $10,000 if both spouses are over 50 and married. There are limitations on the contributions that may be made based on income and other criteria.

Of course, you should consider comparing a Roth IRA to a plain IRA. There are benefits to both, but for many the long term benefit of withdrawing from a Roth IRA after 59 and free from federal tax is a compelling argument to take advantage to this investment vehicle.

If you are self-employed, you should consider another type of a retirement plan called a SEP-IRA or a simple IRA. This type of account allows you flexibility of making contributions toward you own retirement plan. There is currently a maximum contribution of $45,000 in 2007, and there are other amounts you may set aside in a separate account for employees if desired. You should consider depositing into your SEP-IRA to reduce taxable income. If next year does not yield the economic results desired or hoped for, there is no requirement to continue funding the account in future years.

Gifts by the end of the year

The annual amount that may give to one individual without the necessity of filing a gift tax return is currently $12,000. If you have significant highly appreciated assets that you wish be kept in the family, you might consider making gifts of these assets. By gifting them you will reduce the income earned on these gifts, therefore saving both estate taxes and income taxes.

Capital gains payment may be the best option

Currently the highest long-term capital gain rate on qualifying assets is only 15%. If you carefully consider the potential tax liability on other assets verses paying the long-term tax on only the gain, and not the entire amount, it may be advantageous to pay the lower tax as contrasted to selling other assets in order to utilize necessary funds. For example, if you are in the 28% tax bracket and you make eligible withdrawals from our simple IRA or 401(k) plan they may cause the amounts to be taxed at 28% or maybe higher. The sale of a capital gain asset that you realize a long term gain and are not in a qualified plan will trigger only the 15 percent capital gain rate on the gain.

With all tax issues, competent professional assistance should be obtained before you take any action. However, knowing all your options, developing and acting on your tax plan before the end of the year will reap benefits when your return is prepared next year.