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Strategies That Could Make April 15 Less Taxing

Your mailbox has been cluttered in recent weeks with tax forms from employers (W-2), financial institutions (1099) and mortgage companies (1098). As these forms arrive and you attempt to make some sense of them, it is a good time to review some strategies that could make April 15 less taxing.

Get professional help. You should consult an attorney or tax advisor who may be able to provide strategies to save money on taxes based on your personal financial situation. A financial advisor can also help you understand how these and other tax-saving strategies can work for you this year and in the future.

Prepare early. Double-check the forms you receive for errors, with particular attention to names, Social Security numbers (SSN) and dollar amounts. Name and SSN glitches can be a particular snafu, especially if there’s been a name change over the course of the year, or if a gay couple owns an asset jointly. If you find something amiss, contacting the issuer early can help avoid problems down the road.

Know your deductions. Some gay couples may be able to take advantage of planning opportunities at tax time. This can occur when a couple divides deductible expenses, such as charitable contributions or deductions related to home ownership, as long as the method used to divide joint deductions reflects some underlying ownership of the property.

Watch your capital gains and losses. If your portfolio suffered some losses in 2001, the tax law offers some small consolation. After you’ve computed any capital gains and all your capital losses for the year, you must net the gains against the losses to determine the tax treatment. If you have a net gain, you owe tax on it at capital gains rates. If you have a net loss, however, the law allows you to deduct up to $3,000 of that excess loss against other sources of income, such as wages.

Take advantage of low interest rates. In the current economic environment one other planning opportunity deserves consideration – refinancing your home.

If you do refinance your mortgage and itemize your tax deductions, you can continue to deduct your mortgage interest and property taxes as usual; any points you pay, however, have to be amortized and deducted over the life of your loan. This eliminates some of the tax incentive for incurring points on a refinance, and generally makes a no-point loan more favorable.

March 7, 2002

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