Year end tax planning is increasingly important to a growing number of taxpayers. The days in which these strategies were reserved for the super wealthy have long passed. Good reasons exist for most middle income and higher income taxpayers to investigate a variety of year end tax options.

What's New

This year, in addition to a growing list of "tried and true" year end tax strategies, certain significant legislative changes - new for either 2000 or 2001 - may make this year end particularly critical in maximizing your tax savings. Here's an abbreviated list of what's new:
· For higher income taxpayers (generally those with income of more than $150,000), the estimated tax safe harbors have been increased, necessitating many taxpayers to make higher

wage withholdings and estimated tax payments for the year end;
· The five year averaging method of computing tax on a lump-sum retirement distribution is no longer available, making year by year planning especially critical;
· A new reduced rate on long term capital gain for property held for more than five years starts in 2001, giving a new - and sometimes complicated - twist to buy-sell decisions this year end;
· The maximum student loan interest deduction rises from $2,000 to $2,500 starting in 2001;
· The dollar limit for contributions to 401(k) plans increased to $10,500 in 2000;
· The unified estate and gift tax exemption stays at $675,000 in 2000 and 2001, but rises to $700,000 in 2002, while the gift tax annual exclusion remains at $10,000 per recipient;
· For seniors, a change in the social security earnings limit, as revised by the Senior Citizens' Freedom to Work Act of 2000 creates taxable benefits for

some beneficiaries age 65 through 69;
· Between 2000 and 2001, both single and married taxpayers who participate in an employer's retirement plan can earn another $1,000 and still qualify for their own separate deductible Individual Retirement Account;
· The IRS continues its massive reorganization creating new rules for taxpayers, but also new opportunities to "audit-proof" this year's tax returns through year end and pre-filing strategies.