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YEAR-END PLANNING - WHERE TO DRAW THE LINE?

December 26, 2006

I'm a big fan of year-end tax planning. Still, you can overdo a good thing. Dr. Maule discusses a recent New York Times story that points in that direction, anyway:

In the story, To-Do List: Wrap Gifts. Have Baby, David Leonhardt provides an interesting array of observations:

1. Modern medical technology has made it easier for women to select a day for their child's birth.
2. For four of the seven years from 1997 through 2003, December has pushed September aside as the month with the highest number of births; data for years since 2003 has not been released.
3. Since the early 1990s, the tax code has provided an increasing number of tax benefits based on the existence of, and number, of a taxpayer's children.
4. The tax value of a child being born before the end of the year, in contrast to after the beginning of the next year, is in the thousands of dollars.
5. Among the tax breaks are the dependency exemption deduction, the child tax credit, the earned income tax credit, and the medical expense deduction.

From these observations, Leonhardt concludes that the tax law is encouraging people to have children in December.

Accelerating childbirth seems like a somewhat drastic step to take for tax reasons, but it's never been a close call in my family. I did suggest a December wedding 19 years ago for tax reasons, but one look from my June bride made it clear that non-tax considerations would govern.

The TaxProf has more.

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