1. Offset capital gains and losses. You can realize capital gains to offset capital losses at year-end and vice versa. Any excess capital loss for the year can also offset up to $3,000 of ordinary income. Finally, long-term capital gains are eligible for favorable tax treatment: a maximum rate of 15% or 5% for taxpayers in the regular 10% or 15% ordinary income brackets. Note: The 5% rate drops to zero for 2008 (but see planning idea 7).

2. Make gifts to charity. Generally, you can deduct the full amount of cash donations made before the end of the year. If a donation is made by credit card, you can deduct the gift on your 2007 return, even if the charge isn’t actually paid until next year. Note: New rules taking effect this year require strict substantiation for all cash or cash-equivalent contributions, regardless of the amount.

3. Max out on expensing deductions. Under Section 179 of the tax code, you can elect to currently deduct (or “expense”) most or all of the cost of business assets placed in service during the year. The new tax law increases the maximum expensing amount for 2007 from $112,000 to $125,000. This enables you to purchase even more assets at year-end that will be eligible for fast write-offs.

4. Factor in the AMT. The alternative minimum tax (AMT) applies if your AMT liability, based on a special tax computation involving “tax preference” items, exceeds your regular tax liability. Estimate what your AMT liability is for 2007. (Your professional tax adviser can help.) Depending on the result, you might shift tax preferences to 2008 to avoid or reduce AMT liability. Alternatively, you might accelerate income into 2007 if the AMT rate is lower than your top regular tax rate.

5. Sidestep estimated tax traps. If you don’t pay enough federal income tax during the year through withholding or quarterly installments, you may be liable for an “estimated tax” penalty. But no penalty is imposed if annual tax payments equal 90% of the current year’s liability or 100% of the prior year’s tax liability. Note: The percentage for the 100% safe harbor is increased to 110% if your adjusted gross income (AGI) for the prior year exceeded $150,000.

6. Bunch up medical expenses: It is well-known that you can deduct unreimbursed medical and dental expenses to the extent the annual total exceeds 7.5% of your AGI. Try to group nonemergency expenses (e.g., new eyeglasses or dental cleanings) in the tax year that provides the best opportunity for a deduction. If you won’t qualify this year, you may as well postpone expenses to next year.

7. Split income with family members. You may be able to reduce the overall family tax bill by shifting taxable income from your high tax bracket to family members in lower tax brackets. For instance, you might transfer income-producing assets to your young children. However, be aware of the “kiddie tax.” To the extent that unearned income a child under age 18 exceeds $1,700 for 2007, the excess is taxed at the top marginal tax rate of the child’s parents.

Note: Beginning in 2008, the kiddie tax applies to children under age 19 (age 24 for full-time students). These higher age limits will kick in if the child doesn’t have earned income equal to half of his or her annual support. This change could affect capital gain planning.

This is just a brief summary of a few year-end planning ideas. With the help of a tax professional, you can tailor a plan to your personal circumstances.