Return to Transcripts main page
CNN Saturday Morning News
Interview with Donna Levalley
Aired November 29, 2003 - 07:44 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CATHERINE CALLAWAY, CNN ANCHOR: If you think tax time means April, then think again. There are some things you should be doing right now to reduce your taxes.
Joining us with some tips is Donna Levalley. She's contributing editor for "J.K. Lasser's Your Income Tax 2004."
Thanks for being with us.
DONNA LEVALLEY, J.K. LASSER'S YOUR INCOME TAX: Thanks for having me.
CALLAWAY: Talk about last minute. You know, not a lot of time left here in this year. What are some of the things you should be thinking about?
LEVALLEY: Well, I think one of the things you should be thinking about is getting all your paperwork together. One of the things people find or get distracted by when they're going into tax season, which generally starts for people at the end of January when they receive their W-2s and their 1099s, is what situation am I in? You know, where are my receipts?
So it's not a bad idea to start maybe combing through last year's return using that as a roadmap for where you do normally have deductions, where you do normally have expenses, and maybe start getting through - mining through that paperwork now.
Some people have taken days off, you know, in between the holiday to start organizing those things. And for instance, this is a time of giving. A lot of people made a lot of charitable donations, donations of property. Maybe that's one place to start, because that'll help, you know, boost your deductions and maybe get you up to itemizing.
CALLAWAY: Right.
LEVALLEY: And if you make any large donations...
CALLAWAY: Then you just have - you have to do it before the year's over, right? Or get it over...
LEVALLEY: It has - exactly. It has to be completed by the time your year's over. And if anything is cash or property worth $250 or more, you need a written acknowledgement from the charity. So request that when you make the donation, so you'll either get it on the spot or maybe in the mail. And hopefully by the end of January.
CALLAWAY: And what about those flexible accounts, like the healthcare and the daycare accounts?
LEVALLEY: Those are terrific ways to bring down your taxable income. A lot of people are doing benefit selection now. And those are two programs that are offered through your employer.
And especially with flexible care accounts, they take normally non-deductible or deductible eligible for deductibility expenses, medical expenses.
CALLAWAY: Right.
LEVALLEY: But unless they go above 7.5 percent of your adjusted gross income, you can't take the deduction. So if you don't itemize or you don't have very large medical expenditures, you won't get that deduction.
But the flexible spending accounts, they're tax free. They'll be reducing your taxable income for federal and for state purposes. So put as much money in as you think you're going to use. You know, co- payments, regular medication co-payments. If you're getting a new pair of glasses, if someone needs braces maybe this year. I mean, that's a huge expense and usually not covered by insurance.
CALLAWAY: But if you don't spend that money before the end of this month, then you lose that money.
LEVALLEY: You will. And so maybe it's a good idea to get, you know, hey a pair of prescription sunglasses if you have any money remaining in that account. Or if you have possibly a mail order prescription service, and you can bulk up and get, you know, usually I think it's three months worth of prescriptions, that'll bump up those co-pays and help you drain that account. And also, maybe if those co- payments are going up next year, help to stock up before the prices go up.
CALLAWAY: Good time to dump some bad stocks, maybe some mutual funds that aren't doing well?
LEVALLEY: Absolutely. Mutual funds or stocks, good time to sort of check your losses and your gains. Because fortunately, going into the end of this month, people actually have some gains and can actually use those losses to defer or, you know, to defray any kind of gain taxes they're going to be paying. And also, if you don't have any gain, you can deduct up to $3,000 worth of losses against regular income.
So if you're in the higher brackets, if you're in a 25 percent of higher bracket, that's going to bring even more money to you than avoiding the 15 or 10 percent capital gains taxes.
The only thing you want to worry about is something called the wash sale rule. And so you don't want to reinvest in identical stock either 30 days before or 30 days after the sale. So for instance, if you're in a dividend reinvestment program with a mutual fund, if it's been automatically invested say 30 days ago and you make the sale today...
CALLAWAY: Right.
LEVALLEY: ...well that loss isn't going to be allowed.
And if you like the stock that has the loss, and you think it's going to go back up, you can actually repurchase that stock through an IRA, and it won't be violating the wash sale rules.
CALLAWAY: Well, thank you for the tips. Good time to start thinking about that, even though April is a good deal away.
Donna Lavalley, thank you very much.
LEVALLEY: Thank you for having me.
CALLAWAY: Thanks for being with us.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Aired November 29, 2003 - 07:44 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CATHERINE CALLAWAY, CNN ANCHOR: If you think tax time means April, then think again. There are some things you should be doing right now to reduce your taxes.
Joining us with some tips is Donna Levalley. She's contributing editor for "J.K. Lasser's Your Income Tax 2004."
Thanks for being with us.
DONNA LEVALLEY, J.K. LASSER'S YOUR INCOME TAX: Thanks for having me.
CALLAWAY: Talk about last minute. You know, not a lot of time left here in this year. What are some of the things you should be thinking about?
LEVALLEY: Well, I think one of the things you should be thinking about is getting all your paperwork together. One of the things people find or get distracted by when they're going into tax season, which generally starts for people at the end of January when they receive their W-2s and their 1099s, is what situation am I in? You know, where are my receipts?
So it's not a bad idea to start maybe combing through last year's return using that as a roadmap for where you do normally have deductions, where you do normally have expenses, and maybe start getting through - mining through that paperwork now.
Some people have taken days off, you know, in between the holiday to start organizing those things. And for instance, this is a time of giving. A lot of people made a lot of charitable donations, donations of property. Maybe that's one place to start, because that'll help, you know, boost your deductions and maybe get you up to itemizing.
CALLAWAY: Right.
LEVALLEY: And if you make any large donations...
CALLAWAY: Then you just have - you have to do it before the year's over, right? Or get it over...
LEVALLEY: It has - exactly. It has to be completed by the time your year's over. And if anything is cash or property worth $250 or more, you need a written acknowledgement from the charity. So request that when you make the donation, so you'll either get it on the spot or maybe in the mail. And hopefully by the end of January.
CALLAWAY: And what about those flexible accounts, like the healthcare and the daycare accounts?
LEVALLEY: Those are terrific ways to bring down your taxable income. A lot of people are doing benefit selection now. And those are two programs that are offered through your employer.
And especially with flexible care accounts, they take normally non-deductible or deductible eligible for deductibility expenses, medical expenses.
CALLAWAY: Right.
LEVALLEY: But unless they go above 7.5 percent of your adjusted gross income, you can't take the deduction. So if you don't itemize or you don't have very large medical expenditures, you won't get that deduction.
But the flexible spending accounts, they're tax free. They'll be reducing your taxable income for federal and for state purposes. So put as much money in as you think you're going to use. You know, co- payments, regular medication co-payments. If you're getting a new pair of glasses, if someone needs braces maybe this year. I mean, that's a huge expense and usually not covered by insurance.
CALLAWAY: But if you don't spend that money before the end of this month, then you lose that money.
LEVALLEY: You will. And so maybe it's a good idea to get, you know, hey a pair of prescription sunglasses if you have any money remaining in that account. Or if you have possibly a mail order prescription service, and you can bulk up and get, you know, usually I think it's three months worth of prescriptions, that'll bump up those co-pays and help you drain that account. And also, maybe if those co- payments are going up next year, help to stock up before the prices go up.
CALLAWAY: Good time to dump some bad stocks, maybe some mutual funds that aren't doing well?
LEVALLEY: Absolutely. Mutual funds or stocks, good time to sort of check your losses and your gains. Because fortunately, going into the end of this month, people actually have some gains and can actually use those losses to defer or, you know, to defray any kind of gain taxes they're going to be paying. And also, if you don't have any gain, you can deduct up to $3,000 worth of losses against regular income.
So if you're in the higher brackets, if you're in a 25 percent of higher bracket, that's going to bring even more money to you than avoiding the 15 or 10 percent capital gains taxes.
The only thing you want to worry about is something called the wash sale rule. And so you don't want to reinvest in identical stock either 30 days before or 30 days after the sale. So for instance, if you're in a dividend reinvestment program with a mutual fund, if it's been automatically invested say 30 days ago and you make the sale today...
CALLAWAY: Right.
LEVALLEY: ...well that loss isn't going to be allowed.
And if you like the stock that has the loss, and you think it's going to go back up, you can actually repurchase that stock through an IRA, and it won't be violating the wash sale rules.
CALLAWAY: Well, thank you for the tips. Good time to start thinking about that, even though April is a good deal away.
Donna Lavalley, thank you very much.
LEVALLEY: Thank you for having me.
CALLAWAY: Thanks for being with us.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
