With tax season around the corner, now may be a good time to open the door to some year-end planning. It's important to take action before the end of the year, or it will be too late to take advantage of many of these potential opportunities for trimming your tax bill.

1. Give Appreciated Securities to Charity
   Both you and a charity can benefit if you give appreciated assets to the charity instead of selling the assets and donating the after-tax proceeds. The amount of the savings will depend on the amount of capital gains tax you would have paid on the sale. The amount of the current year's deduction does have limitations, so check with your financial consultant and tax adviser first.
   
   
2. Use Gifts to Pare Down Your Estate-Tax Burden
   If you have grandchildren, you may want to help your children by assisting with the costs of your grandchildren's education. You can give up to $10,000($20,000 for you and your spouse) per year to whomever you like without triggering gift taxes. For tax year 2000, each individual can transfer either during life or upon death, $675,000 ($1.35 million for you and your spouse) free of federal estate and gift taxes. This amount is in addition to the $10,000 annual exclusion amount.
   
   
3. Trim Your Taxable Income Through Retirement Accounts
   Contributing the maximum you can afford to an employer-sponsored retirement plan and having the contributions taken directly from you salary before taxes is one of the easiest ways to help build your retirement savings. Outside of your employer-sponsored retirement plan, an IRA is another way for you to accumulate tax-advantaged retirement savings. If you meet eligibility requirements, a traditional IRA could allow you to defer $2,000 ($4,000 for you and your spouse) annually. Another alternative is a RothIRA. As with a traditional IRA, you can invest up to $2,000 ($4,000 for you and your spouse) annually. While a Roth IRA cannot help reduce your current-year tax burden, it does allow the investment to potentially grow income tax free.
   
   
4. Sprinkle Your Portfolio With Other Tax-Advantaged Investments
   Most individuals purchase life insurance for the death benefit; however, certain types of life insurance can also help reduce your taxes. Life insurance can provide policyholders the opportunity for long-term cash accumulation. While the earnings from these policies are tax-deferred, you should remember that if you surrender a policy in its early years, fees and expenses could diminish the return on your investment. With annuities, any growth on your investment will not be subject to current taxes until you access the money. Only when you are ready to take money from the annuity do you pay tax on any gain as it is taken out of the contract in the year received. You may take partial distributions as needed, but there may be a 10 percent federal tax penalty if you are under age 59 1/2, much like the penalty associated with IRAs.
   
   
5. Avoid Penalties for Estimated Tax Underpayments
   Federal tax law requires the payment of income taxes throughout the year as you earn your income. This obligation may be met through withholding or quarterly estimated tax payments or both. For 2000, if total tax minus withholding and payments is less than $1,000, you will not be assessed a penalty for underpayment of estimated tax. However, if you overpay your estimated taxes, you are in effect making an interest-free loan to the government.

Copyright
This article provided by A.G. Edwards & Sons Inc. Member SIPC. Special contributions by Steven J. Hall, Joliet office of A.G. Edwards & Sons Inc, 2400 Glenwood Ave, Suite 230, Joliet, IL 60435. Phone: 800-345-2664.