As 2003 winds down, taxpayers need to begin exploring strategic year-end tax planning tactics that will help reduce federal income taxes both next spring and in future years.

		Write us To submit a letter or an essay for consideration for The Private Sector, please send it via e-mail to Business@Post-gazette.com or via regular mail to Post-Gazette Business Section, Private Sector, 34 Blvd. of the Allies, Pittsburgh, Pa. 15222. Please include your telephone number, municipality and return address for verification.

Some of the key areas to focus on are charitable contributions, educational and retirement planning, and changes to investment portfolio. The following is a list of tax planning strategies that should be considered prior to December 31, 2003, for both individuals and companies.

Investors sell stocks at a loss. If you have stocks that have decreased in value this year, consider selling them at a loss and donating the proceeds to charity -- claiming both a capital loss and a charitable deduction.

Don't Forget About the Alternative Minimum Tax (AMT) The new 15 percent and 5 percent long-term capital gain and dividend rates apply for AMT purposes. The lower overall tax rates as well as the special dividend and long-term capital gains rates may actually make it easier to fall into the AMT. So monitor your situation throughout the year, and take action as necessary to either avoid the AMT or make its lower maximum rate work to your advantage. For 2003 and 2004, the AMT exemption increases from $49,000 to $58,000 for joint filers, from $35,750 to $40,250 for single filers and from $24,500 to $29,000 for married persons who file separately. These amounts expire after 2004, returning the exemptions to pre-2001 levels of $45,000, $33,750 and $22,500, respectively.

Time capital Gains and Losses. Recognizing some losses when you already have recognized gains lets you offset them and even claim up to an additional $3,000 per year. Or, if you already have recognized a capital loss, you have the freedom to recognize capital gains that will be absorbed by the loss, without concern about paying a tax, or opt to carry forward a loss. If you have pre-May 6, 2003, gains still taxed at the old 20 percent rate, consider offsetting them with losses before year-end.

Turn bad investments into something good. A failed investment is never a pleasant experience. But you can add a silver lining to this dark cloud by showing that a security or nonbusiness loan is fully worthless. To do so, you must prove that the security has absolutely no value. Be careful: Even if it retains a negligible value, you may not be able to claim it as worthless. One way to eliminate this remaining small value is to sell it through a bona fide sale to an unrelated party for a nominal amount. To take the loss in 2003, you must finalize the sale before year-end or abandon the asset or investment. To claim a bad debt on a nonbusiness loan, you must be able to show that it became totally worthless by year-end and that you have made a reasonable attempt to collect on it.

Families: Make year-end gifts. Donating cash or other assets to charity is a great way to do good while lowering your tax bill. Because charitable contributions are generally fully deductible, the more you donate to charity, the more tax benefit you receive -- as long as your itemized deductions exceed the standard deduction and you don't surpass the limits.

Contribute the maximum to retirement accounts. Make the most of your 401(k) plan by contributing the maximum $12,000 ($14,000 if you will be age 50 or older by Dec. 31) before the end of the year. Contributions to the 401(k) plan are not taxed until you take the money out -- and the investment earnings are tax-deferred too.

Consider a Section 529 plan. Also known as qualified tuition programs, these state-sponsored plans enable parents or grandparents to either secure current tuition rates with a prepaid tuition program or create tax-free savings accounts to fund college expenses. Considerable income tax advantages may follow. Your contribution may qualify for the $11,000 annual gift tax exclusion ($22,000 for gifts by married couples).

Make lifetime gifts. Gifts you make during your lifetime are subject to federal gift tax. The top gift tax rate will gradually decrease until it reaches 35 percent in 2010. The exemption will no longer keep pace with the estate tax exemption and will remain at $1 million through 2010 under current law. Fortunately, you can exclude gifts of up to $11,000 per recipient each year. This exclusion increases to $22,000 per recipient if your spouse elects gift splitting.

Shift income to children. In 2003, you and your spouse can gift up to $22,000 of assets annually free of federal gift tax to each of your children or grandchildren. For children under age 14, unearned income beyond $1,500 will be taxed at their parents' marginal rate -- so the income tax benefit of shifting income to them is limited. But for children ages 14 and older, all of their income (earned and unearned) will be taxed at their own, generally lower marginal rates.

Avail yourself of the drop in overall tax rates. This year's tax law accelerates the rate reductions promised by the 2001 act. The top rate has dropped to 35 percent with the lower brackets now at 33 percent, 28 percent, 25 percent, 15 percent and 10 percent. In response, consider lowering your paycheck's withholding amount and using those extra dollars to invest in an IRA or 401(k). By doing so, you'll enjoy the tax cut and create a new deduction for yourself.

Businesses: When possible, defer income. In potentially high-income years, consider deferring some income to later years. For example, if your business uses the cash method of accounting, you can delay billing notices as you approach year-end and pay as many expenses as possible. Or, if you use the accrual method, you can delay shipping products or delivering services until the new tax year. Of course, consider the business risks of these strategies.

Expense when you can. The Section 179 expense election allows a current deduction for assets that otherwise would be subject to the normal depreciation rules. Thanks to the new tax law, this amount has now been increased to $100,000 for 2003 and 2004, and now specifically includes "off-the-shelf" computer software. These increased dollar amounts are inflation-indexed for tax years beginning after 2003, but in 2005 the rules go back to the way they were before the new tax law. So it may be appropriate to schedule major capital additions in 2003 or 2004 when the greatest tax benefits are available.

Use the bonus depreciation deduction. Thanks to the two recent tax law changes, eligible companies can now write off additional "bonus" depreciation for new equipment purchases and certain leasehold improvements. For purchases or improvements made, you may be able to write off 50 percent of these costs after May 6, 2003, but before January 1, 2005. Thus, your company can immediately write off 50 percent of a new asset's cost and recover the remaining 50 percent under regular depreciation schedules.