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The year 2007 will go down in financial history as erratic. Gas prices hover at $3 per gallon and the Federal Reserve continues to lower their benchmark federal funds rate (the interest rate set by the Federal Reserve for banks lending money to each other overnight), which is currently 4.25 percent (as of Dec. 19). It’s the third cut this year in an effort to impede the rate of foreclosures. While we cope with the highs and lows of the economy, it’s imperative that we not get sidetracked and end up getting slammed on April 15, 2008, with a high tax bill.

Here are five proven strategies to keep the 2007 tax bill low. - yvette caslin

1. Make the maximum contribution to your 401(K) plan or any other tax-deferred qualified retirement plan. This happens to be the best method of all because you’re funding your savings and Uncle Sam won’t touch it, unless you withdraw from it prematurely.

2. Make charitable donations, cash or non-cash. IRS rules are stringent, so it’s mandatory that you retain receipts. This rule applies to church offerings also. ro informed you in a finance feature earlier this year that you must have receipts or cancelled checks to claim collection plate offerings as an itemized deduction. And those non-cash contributions like old clothing and household items, must be in “good used condition or better” to qualify for a tax credit. The Salvation Army has posted a great valuation chart to assist you with determining the value of items in this category, visit www.satruck.com/ValueGuide.asp. If you’re considering donating a car or boat and believe the value exceeds $500, become familiar with The American Job Creations Act of 2004, which was designed to provide relief for taxpayers on their federal and state income tax bills.

3. Make some energy efficiency improvements to your home like insulation systems that reduce heat loss/gain, exterior windows and skylights, exterior doors, and metal roofs that meet Energy Star requirements (www.irs.gov). The improvements must be made at your primary residence to qualify. Your tax preparer can advise you about the law and tax credit offered.

4. If you fall into a higher tax bracket, postpone your income from bonuses and commissions until next year. According to cnnmoney.com, income ranges that apply to each tax bracket go up with inflation annually, so more of your income will be taxed in 2008 at lower rates.

5. If you’re a small business owner, request your clients pay you after the first of next year. This applies only if your business is in good financial standing.

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