Many people would love to put 2008 behind them. But before rushing off to ring in the new year, take advantage of a handful of tax-saving maneuvers that could greatly reduce your 2008 tax bill. Wait until April, and it will be too late.

Here are five year-end tax moves to make now:

1. Be Giving

If you're like most cash-strapped consumers you're probably trying to cut back on spending. There is one expense, however, that's worth making: giving to charity. Not only do you help out those in need, but it will also do wonders for your tax bill. Make donations of money or items to qualified charities before year's end and you can deduct a chunk of that amount from your 2008 tax bill.

One thing to keep in mind is that you can't get the tax break unless you itemize your taxes. Also, when donating money, make sure to use a credit card or check so you have documented proof of the donation. For noncash donations, keep a list of every sweater or piece of exercise equipment you give away and estimate its “fair market value." And don't donate socks that need darning. The Pension Protection Act of 2006 stipulates that everything must be in "good used condition or better."

2. Cut Your Losses

Believe it or not there is one silver lining to that shrinking portfolio: By getting rid of some losing investments now, you can reap some serious tax savings. Sell those stocks before the end of the year and you can deduct the resulting capital losses against any capital gains you may have logged earlier in the year. Then, you can write off the remaining amount against up to $3,000 in ordinary income. Any excess capital losses can then be carried forward to future years.

3. Prepay a Few Bills

Prepaying a few 2009 bills in 2008 can result in even more write-offs for tax payers. Homeowners, for example, can make their January mortgage payment in December, giving them one more month of interest to deduct. With large and predictable medical bills, such as braces for the kids, consider paying for the whole shebang before Dec. 31. The IRS allows families to itemize and deduct medical and dental expenses that exceed 7.5% of one’s adjusted gross income. (Of course, most people would have to rack up more medical bills than just braces, but such an expense could definitely help you work toward that goal.)

Qualifying parents with kids in college should consider prepaying January’s tuition bill in December so they can maximize the Hope Scholarship or Lifetime Learning higher education tax credits. (Just keep in mind that in order to claim tuition prepayments for 2008, the academic semester must begin between January and March of 2009.) Parents can even take the tax credit for tuition payments made by a grandparent, provided Mom and Dad list their child as a dependent on their tax return.

4. Contribute to a College Savings Plan

Another tip for parents: Contribute to a 529 college savings plan. A number of states allow parents to write off contributions up to a certain dollar amount.. An added bonus for investing in a 529 is that many stocks are currently trading well below their previous highs, creating an opportunity to pick up shares at a discount.

5. Give Some Money or Stock Away

Uncle Sam allows folks to give any individual a $12,000 tax-free gift. Married couples can combine their gifts for a total of $24,000. And those who give to children and grandchildren can actively reduce their future estate taxes. People with children who recently graduated from college or elderly parents on a limited income may want to consider gifting them stock instead of cash. During 2008-10, those in the 10%-to-15% tax brackets will pay 0% on long-term capital gains. Also, if someone has holdings that have fallen in value, this provides an opportunity to gift more shares at a lower cost.

Wishing you many happy returns,

Dr. Wayne T. Essex