robpimen...[at]yahoo.com wrote:
- quote -

Close enough

- quote -

Correct

- quote -

The reason I suggested you not itemize is that the Standard
Deduction would probably be smaller than your itemized
deductions (otherwise, why itemize?) and would reduce your
taxable income less. The calculated tax would be higher,
thus allowing you to use more of the credits you might have
to reduce the tax to zero. While your (a) and (b) reasons
are valid, I was being somewhat facetious with my comment.

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Hi Tom, and thank you. This was the type of response I was
hoping for. Please see below for more.

Tom Russ <t...[at]isi.edu> wrote:
- quote -

Unfortunately my property taxes are handled through an
escrow account, so I can't dictate when they are paid.
However, the extra mortgage payment and charitable
deductions are definitely something I can leverage.

- quote -

Thanks for the info on the "wash sale". Still a novice, so
not ready to invest in something I don't fully understand
(E.g. stocks). However, I have been contemplating moving my
emergency fund from a tax- free MM account, to a interest
bearing checking or savings account, or another similar
entity that yields no risk but a higher rate of return than
the MM account. Since my credits would probably absorb most
of the additional tax generated from the interest of a
taxable ~5% account, it should produce better results than
the 3% tax-free MM account currently holding my money.
Thanks.

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

robpimen...[at]yahoo.com wrote:

- quote -

There are generally two strategies for managing this issue.

1. You can delay deductions into the following year by not
paying them this year. One easy one to move about, if you
have a mortgage, is the mortgage payment due on Jan. 1st. If
you pay early you get it this year. Property taxes can
sometimes also be managed in a similar fashion. Optional
payments, like (some) medical expenses and charitable
contributions can also be easily moved into the following
year.

2. You can generate more income. Interest income from
investments is one possibility, although usually not that
easy to control directly. If you have appreciated capital
assets like stocks or mutual funds, you could sell them to
realize capital gains this year. If you want to stay in the
same investment, you could even sell and immediately
repurchase. The "wash sale" rules apply only to losses, not
gains. That would allow you to carefully control the amount
of extra income you get this year.

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Hi Herb, and thanks for your response. Please see my comments below.

Herb Smith <smithf...[at]aol.com> wrote:
- quote -

I guess what I meant by "lose" was that if my credits (line
56) were 2500 and the taxes I owed (line 46) were 2000, then
I wouldn't realize the full benefit of the $2500 in credits.
I looked up the definition of after-tax income and I think I
understand the concept, I'm just not sure how to calculate
it. Would my after-tax income be line 38 minus line 63?

- quote -


My limited understanding was that if there was a significant
change (E.g. income dropped by 33%) it might impact the
balance between my credits and the taxes I owed, and
ultimately dictate which strategy/ ies I could employ to
maximize the benefit of the credits I would receive. My
apologies if the information was unnecessary.

- quote -

Ok, if I understand you correctly, education credits (or at
least LLC) must be claimed for the same tax year in which
the expenses were incurred, or rather paid?

- quote -

The benefit of not itemizing deductions in this scenario
would be (a) less work (b) less chance a making a mistake on
my return (c) something else??

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

robpimen...[at]yahoo.com wrote:

- quote -

No, it just means that your tax liability is zero. Your
after tax income is higher -- which translates to a "gain".

- quote -

Your point is...?

- quote -

Not unless you can delay payment of the educational expenses
to the future year. I doubt that the school would approve
that!

- quote -

You could always "elect" NOT to itemize deductions, using
the credits instead to reduce your tax to zero. Note that
deductions can only be claimed in the year paid, not carried
forward at your convenience

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Looking at my 1040 from 2006, I can see that my total
credits (line 56) nearly equaled the tax I owed (line 46).
Based on what the form says, and what is in p970

"The lifetime learning credit is a nonrefundable credit.
This means that it can reduce your tax to zero, but if the
credit is more than your tax the excess will not be refunded
to you."

I can expect to "lose" money if the credits ever exceeded
the tax I owed. Having said that, I expect that the two
values will be nearly equal again this year. Little has
changed for me (income is up a bit, filing status is the
same, number of exemptions is the same, itemized deductions
will be about the same, etc.).

However, should something happen between now and the end of
the year (E.g. loss of employment), which drastically
lowered my AGI, I was wondering if I could delay the claim
of my Lifetime learning credit for 2007 until my income
climbed again (I.e. 2008, 2009)? If not, are there any other
strategies I could employ to keep my tax owed high enough to
maximize the benefit of the credits (I.e. itemize some
deductions in a subsequent year, generate more interest
income through investments to bring up AGI)?

Thanks,
pimy

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >