• Since 2004 is last year for "bonus depreciation," business taxpayers should consider putting new equipment in service before year-end to get a 50% bonus first-year depreciation allowance, plus regular depreciation deductions on remaining adjusted basis.

• Business taxpayers should also consider purchasing equipment, furniture, fixtures, etc. that qualify for $102,000 business property expensing option (Federal Section 179 Deduction).

• Consider settling an insurance or damage claim in order to maximize your casualty loss deduction this year.

• You may be able to save taxes this year and next year by applying a bunching strategy to "miscellaneous" itemized deductions and medical expenses since total for each of these categories must exceed a percentage of your adjusted gross income before anything is deductible. Examples of "miscellaneous" itemized deductions include job-related expenses not reimbursed by one's employer (e.g., uniforms), subscriptions to professional journals, union and professional dues, tuition for job-related courses, and tax preparation and tax consultation/planning fees.

• If you are facing a penalty for underpayment of estimated tax, you may be able to eliminate or reduce it by increasing your withholding.

• Self-employed individuals should consider setting up a self-employed retirement plan.

• You can save gift and estate taxes by making gifts sheltered by annual gift tax exclusion before end of year. You can give $11,000 each year to an unlimited number of individuals but you cannot carry over unused exclusions from one year to next.

• If you are thinking of donating a used auto to charity, consider doing so before 2005 in order to maximize your deduction.

• If you have any capital gains or losses from sales of stock or other capital assets or you have stock or other capital assets that you are considering selling, you should consider how to best coordinate timing your gains and losses to minimize tax on your gains and maximize tax benefit from your losses.

These are just some steps that can be taken before year-end to save taxes. Do not let cost of a meeting with your tax professional deter you from taking advantage of professional advice that could save you hundreds or even thousands of dollars in taxes (and penalties and/or interest in some cases). Additionally, it will allow you to be better prepared for tax preparation in early 2005. Depending on your tax situation, a thorough consultation could take as little as an hour!

5. Pay on Time

This one is quite obvious. But after 12.5 years in mortgage business, I discovered it still needs repeating. Your creditors were gracious enough to loan you money. Now pay your damn bills! If you don't, your credit score decreases. EVEN IF ONLY 30 DAYS LATE!

That's right folks. For some reason people think, "I'm only a few weeks late. What's big deal?" Well, for loan company, if you pay late but consistent, they make a lot more money with late fees and more interest (if a simple interest loan). For you, your credit score is damaged. If you think long-term and credit score, I'm certain you would not have a cavalier attitude.

6. Pay Down Debts

This seems like an obvious method, doesn't it? But it is not as transparent as you might think. Remember, we're playing with high-level statistics and probabilities which evaluates and forecasts trends in your behavior. Here's what you do...

Never pay off your revolving debt in it's entirety! Isn't that a surprise? Think about it. Your credit score is a reflection of your ability to manage your credit. Paying off your debt is not managing your debt. If you have a zero balance, how can you manage it? You don't. It no longer exists. And you cannot manage what does not exist, right? Therefore, in terms of credit score, you have demonstrated your ability to swiftly pay off accounts to avoid managing them. Thus, slightly decreasing your credit score.

One exception, of course, is if you're over extended to begin with. Pay off what's necessary to make your credit profile look great. Then manage remaining credit.

7. Don't Close Accounts

Even if you pay off revolving debts, do not close account. The longer an account is open with no negative reports, better it reflects in your overall credit score. This is due to weighted-average in credit score formula. Many credit experts suggest a balance of 30% of your credit limit. That's ideal. But you can go as high as 70% and still maintain a healthy credit score.

8. No New Credit

You must be vigilant in your credit behavior if you want best credit score. Therefore, do not get any new credit unless it is absolutely necessary. Each time you apply for credit, an inquiry is added to your report. This usually drops your credit score slightly. When you have fresh credit, there is no track record how you will manage (or pay) this account. Therefore, it's a higher risk which results in a minor drop in your credit score. Remember, your credit score is about risk assessment.

Here's what you do: obtain credit for your housing, transportation, college or continued education and 3-5 credit cards. That's really all you need for personal credit. If you want more credit, request a credit limit increase on your current cards rather than apply for new ones.

9. Maintain A Mix of Credit Types

If you show you can handle different types of credit at same time, you are rewarded with a great credit score. In other words, get installment loans like vehicle, personal loan or mortgage. Get revolving credit like credit cards: Visa, Mastercard, Sears, Sunoco Gas, Costco. By mixing it up, you demonstrate you can manage your credit because you will have short term and long term credit with a fixed payment. As well as a "variable" monthly payment on your credit cards.

Keep these accounts open with a balance of 70% or less and paid on time and you will witness your credit score climb to great heights.

10. Don't File Bankruptcy or Foreclosure

Here's most obvious advice: Don't file for bankruptcy or foreclosure. These stay on your credit report for 10 years and always decrease your credit score. The older bankruptcy or foreclosure account becomes, coupled with re-built credit history, less of an impact they play on your credit score.

Contrary to popular beliefs, you can legally delete a bankruptcy and foreclosure. It's not easy. But it's possible. See advanced methods for that solution.

To quickly rebuild your credit history after a bankruptcy or foreclosure, use Round Robin strategy above and get secured credit cards. Now you can even get a car loan or mortgage right after bankruptcy.

© 2004 David Czach.

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