End-of-year tax planning can save dollars when April 15 rolls around.
With a little effort, you may be able to defer taxable income to a later year and speed up deductions into the current one. Or you could accelerate income into this year and defer expenses, if that makes more sense.

Estimate tax bill
The best place to start is by looking at your tax return for 2001 and estimating your tax bill for 2002.
You can also determine whether your tax payments have been enough to avoid underpayment. Compare what's already been withheld and any estimated tax payments you've made with your anticipated bill.
Underpaying your federal tax by more than $1,000 triggers a penalty, so if you haven't withheld a sufficient amount, add to your employee withholding by revising your W-4 form or make an estimated tax payment before year's end.

To itemize or not?
Only about one-third of the nearly 130 million individual returns filed nationwide were itemized, according to the Internal Revenue Service. This means that a lot of people should take the time to determine if they need to act now to take advantage of certain itemized deductions that could help reduce their tax bills for 2002, instead of taking the standard deduction.
For example, if you have the money, pay your estimated state income tax and/or local property taxes before year's end. If you wait until January to pay those taxes, you cannot claim the deduction until the next tax year.
Before you do anything, be sure to consider whether you will be subject to the Alternative Minimum Tax. The AMT was established to ensure that high-income people who take many deductions and credits will pay a minimum amount of taxes.
The levy is increasingly hitting middle-class taxpayers who may have everyday deductions; an estimated 6 million by 2005, up from 500,000 in 1998, may be affected.
The IRS estimates that a family with five children, and wages of $70,000 with standard deductions, could incur a bit of extra tax because of AMT, which disallows interest on home-equity loans, dependent exemptions, and local taxes.

Cluster medical bills
Out-of-pocket medical expenses are deductible only if they exceed 7.5 percent of your adjusted gross income. Therefore, you should total them before year's end to see if you are near the limit. If you are, accelerate elective medical procedures into this year to increase your deduction. Otherwise, postpone any non-essential costs and try to bunch the expenses in 2003 to qualify next tax year.

Be generous
Consider donating appreciated stocks to charity. You can deduct the fair market value, and you will not owe taxes on your gains.
If you want to give away assets that have fallen in value, sell first and then donate the cash. You will be able to deduct the investment loss (up to $3,000) as well as the charitable gift.
You can give anyone up to $11,000 a year without triggering the gift tax. Married couples can give any one person up to $22,000.

More Tax Planning Tips

Self-employed and small-business owners have to establish their simplified retirement pension plans by December 31, but the plans don't have to be funded until April 15, 2003.
Update IRA beneficiaries. These designations often change as years pass and family circumstances change.
Update your estate plan. There have been many changes in the federal estate-tax laws in the last few years that create new opportunities. Ask an expert for details.
There's tax help available on the Internet at www.irs.gov.