Dollars & Sense: Plan now to save on taxes for 2007

As this tax season winds down, it’s not too early to start thinking about taxes for 2007. Steps you take now and through the year can help you reduce your tax liability next April.

“”Taxes 2007 for Dummies” by Eric Tyson (Wiley, $16.95) is packed with suggestions, no matter what your tax situation.

“Health Savings Accounts allow you to put tax-free money aside if you have a high-deductible health plan. “High deductible” means at least $1,000 for individuals and $2,000 for families. The maximum you can contribute is $2,700 for individuals and $5,450 for a family.

Tyson suggests switching to a high-deductible health plan to take advantage of having an HSA: You save on your premiums as well as on your taxes.

“Consider refinancing a mortgage and pulling out cash to pay off consumer debts such as credit cards and auto loans. You benefit in two ways: Mortgage debt is cheaper than consumer debt, and you can deduct mortgage interest as well as your refinance expenses such as points.

“When you donate to charity, ask for a receipt every time, because the fair-market value of your donations is deductible. If you work for a charitable organization, keep track of your mileage, because that’s deductible, too.

“Energy credits are another area where you get a double benefit: Your utilities costs are lowered, and you get a credit on your taxes.

“You can take a 10 percent credit of the cost of materials designed to reduce heat loss, as well as windows and skylights (up to a limit of $2,000), as well as Energy Star exterior doors and metal roofs. Install a solar energy system and you can take a 30 percent credit, up to $2,000.

Tyson recommends using a tax adviser, even if it’s only once. Chances are that you can recoup the cost of getting advice when you learn more ways to reduce your taxes.

“Taxes 2007 for Dummies” is loaded with money-saving tax reduction suggestions on both ends of the financial spectrum: Whether you have a little or a lot, you’ll find suggestions to help lower your taxes.

The author, Eric Tyson, has had four finance books on BusinessWeek’s business best-seller list at the same time. He’s worth listening to.