Year-end tax planning

Looking to reduce your tax burden? Well, in 2004, you can expense up to $102,000 of new or used equipment purchases. A 50 percent bonus depreciation expense also is available in 2004, but it will expire at the end of this year unless congress extends the provision. Bonus depreciation applies to new equipment purchases and to leasehold improvements for those who own a practice but not the real estate.

Year-end is also the best time to evaluate your retirement plan, because certain plans need to be set up by Dec. 31. And, of course, regardless of your plan, you should think about how to minimize your tax burden by maximizing contributions. The defined contribution plan limit this year is $41,000. SIMPLE Plan contribution limits are $9,000, and 401(k) limits are $13,000.

Here are five more tax tips for year-end planning:

• Consider using credit cards to pay bills by the end of the year. This approach can generate tax deductions even if you report on the cash basis.

• Review your stocks for capital gains or losses. Make sure you're offsetting losses against gains. The law provides net losses of up to $3,000 per year, meaning you can deduct up to $3,000 of capital losses per year after you offset them with your gains, and long-term gains are still favored with a 15 percent rate.

• If you own an S corporation, review stock basis issues if your practice will generate a loss this year. Losses in S corporations can only be taken to the extent of basis. Basis represents your investments in the stock and/or loans you have made to the practice that have not been used to offset losses from previous years.

• If you're thinking of taking a bonus, look at how it would affect your tax bracket. Would you be better off taking the additional compensation now, or next year?

• If you can, make an accelerated payment toward your estimated individual state tax before Dec. 31, but beware of the Alternative Minimum Tax. If it has affected you in the past, talk to your tax advisor before making the payment.