Tax season is in full bloom

WASHINGTON -- October marks the beginning of the real tax season. Not the one where you spend long days at the dining-room table poring over piles of receipts. But the one where you can really influence the size of the check you have to write come April.

With three months left in 2007, here are the moves to make now to lower your income taxes.

• Get charitable deductions in order. Most people do much of their giving between now and the end of the year. Figure out a plan, so that you give all you want to the organizations you most want to support, so that it's all deductible.

This year for the first time, that means you need proof to back up every gift -- either a bank record or a note from the charity. If you're donating something of value, a work of art, for example, get it appraised before you donate it. If you are giving away a car, try to give it to a charity that will use it as a car, instead of one that will sell it. Your donation is likely to be worth more. You can pay next year's church dues in December, even if you put it on a credit card, and take the deduction in 2007.

There's another provision expiring Dec. 31 that can help non-itemizers who are making required minimum distributions from their IRAs. Until the end of this year, they can make contributions directly from their IRAs to the charity of their choice. This move excludes the IRA withdrawal from the taxes you would typically have to pay on it.

• Time the market, sort of. Sell stocks that are losing money. Those losses will offset any taxable gains you have and as much as $3,000 of ordinary income. If you have bigger losses than that, you can carry them forward for future years.

And learn how to handle the mutual fund gains distributions that usually come in December: If you're going to buy a fund, buy it after the distribution date, lest you get stuck with a taxable distribution of earnings you were not there to actually earn. If you're thinking of selling, sell it before. That insures any capital gains and dividends will be taxed at the 15 percent rate, and not as ordinary income.

• Meet retirement planning deadlines. You have until April 15, 2008, to complete your contributions to IRAs and health savings accounts, but some moves have to be made this year. If you are converting from a traditional to a Roth IRA, you have to do that before the end of the year. If you are creating your own qualified retirement plan, such as a solo 401(k), that has to be set up by Dec. 31 to count contributions against your 2007 taxes.

• Pay a lot of bills early. If you're putting a child through college, you may be eligible for Hope or Lifetime Learning tax credits. Pay that second-semester tuition bill in December. Similarly, write one extra mortgage payment, pay your property taxes, and estimated state income taxes in December. It's all deductible this year instead of next, even if you mail your check on Dec. 31.

• Guesstimate your AMT liability. If you pay a lot in taxes or have a lot of children, you may find yourself getting hit with the alternative minimum tax for 2007. That tax -- originally designed to snag rich folks who had mastered tax avoidance tricks -- now hits more middle income taxpayers every year.

If you are in its path, turn most of that previous advice upside down. Defer mortgage and tax payments into 2008. Aim for keeping your income higher and your deductions lower, not higher, if you think you are AMT bait.

© 2007, Reuters