Lowering the burden

Personal Finance | Actions taken before the end of the year may ease tax pain in April | David Bahnsen

In the last issue, I addressed the wisdom of doing tax planning before the calendar year ends. Particularly in challenging years for the investment markets (like this one), there are often strategies to make the best of a tough situation. Here are other ideas individuals may want to look at prior to the end of the year to potentially reduce their tax burden for 2008. As always, it is a good idea to consult with your tax advisor before proceeding.

One step that is practical for more and more people is to convert a portion of traditional IRA balances into Roth IRAs, particularly for those in one of the lowest two tax brackets. Assuming that the amount you convert will not trigger an increase in your tax bracket, moving the funds now will create a tremendous tax advantage for those who believe their tax brackets will be higher in the future.