Saturday, July 01, 2000

Personal finance

Year-round tax plan saves big

        Just because you're playing in the sun or swinging the sticks doesn't mean you should forget about saving every penny you can on next year's taxes.

        “People think about taxes at one or two times a year — leading up to April 15 or at the end of the year,” said David Lingler, an accountant at Blue Ash's Cassady Schiller & Associates.

        Instead, you should keep track of records and potential deductions year round. Consider these tax-cutting tips from Cassady Schiller:

        • Look at child care credits. The cost of sending your children to a summer camp may qualify for the credit if both parents work.

        • Donate unwanted items to charity for a tax deduction. Many people find tons of useless clothing and household items in summer clean-ups.

        • Deduct some travel expenses, if you conducted business on some portion of the trip. That includes your lodging, meals (at 50 percent), transportation and incidental expenses (such as tips) to the extent they are business related.

        • Hire your minor children for the summer, if you have an unincorporated family business. The wages you pay them are deductible to your business and will be taxed in the children's lower or zero tax bracket. There's also no Social Security tax to pay on wages paid to your children who are under 18.

        • Do business entertaining. Be sure you keep complete records of the cost, the date, who was entertained, and what the business purpose was. Your deduction is limited to 50 percent.

        • Remember that federal estate taxes can be even higher than regular income tax rates. Summer is the ideal time to create or update your estate plan as part of your overall tax-reduction efforts.

        “You should keep it in the back of your head all through the year,” said Bob Schiller, partner in Cassady Schiller.

        Oops. Sorry, Mr. Pepper: Last week's column about the difference between qualified and nonqualified stock options and how they are taxed prompted a phone call from returning Procter & Gamble chairman John Pepper.

        I had said in the column that Mr. Pepper likely received incentive, or qualified, stock options. Those are the kind that receive preferential tax treatment. Depending on your holding period, you may pay only capital gains.

        P&G executives get mostly nonqualified stock options, Mr. Pepper said. Those are the kind taxed at ordinary rates on the difference between their strike prices and the stock's market rates. In fact, because options are publicly traded on P&G stock, tax is due at the time the option is granted, regardless of when it's exercised.

        More information on employee stock options can be found at

        Amy Higgins writes about personal finance for the Enquirer. You can reach her at 768-8373;; or Your Money, The Cincinnati Enquirer, 312 Elm St., Cincinnati 45202.


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