The usual approach to year-end tax planning is to defer the payment of tax by accelerating deductions into 2008 and postponing recognition of income items into 2009. This year might be different. Because of the state of the nation's economy, some commentators are predicting an increase in tax rates. On the other hand, some are expecting no increase in 2009 because of the adverse effect it would have on the economy. If you believe that a substantial increase in tax rates will apply to 2009, then losses and deductions may be worth more in the future than currently, and you wouldn't want to accelerate them into 2008.

However, one also has to consider the time value of money. Paying tax earlier than you have to is always a dubious proposition. Even if taxes are higher later, it may not be smart to pay tax earlier. It is difficult to plan when you don't know what the rules are.

• If you want to accelerate income, here are some ideas:

If you have the option of recognizing and pocketing a large gain this year or next, think about what effect the Obama administration will have on capital gains rates. The current 15 percent long-term capital gains rate is at a historic low.

Sell stocks with losses before the end of the year to reduce any other gains you may have. Remember that only $3,000 of net losses from security transactions can be deducted against ordinary income.

Mutual funds capital gain distributions can also be setoff by losses. Recognize enough losses to wipe out these gains.

If you do sell some stocks at a loss, be careful not to repurchase the same security within 30 days of the sale date to avoid the wash sale rules.

Be mindful of the length of time that you have held the investment — long-term capital gain rates are applicable when you have held the property for more than one year. Be careful — don't lose the favorable long-term capital gain rate.

If you sold a piece of real estate or another asset on the installment basis, consider electing out of installment treatment on your tax return. You can wait until Oct. 15 to do this and wait and see what happens to rates.

If you are in business, collect as many accounts receivable before Dec. 31 as you can. Ask customers to prepay for services to be rendered in 2009.

• If you want to defer income, try these ideas:

Ask your employer to defer payment of any bonuses until 2009.

Make sure you are contributing the maximum to your 401(k), $15,500 for 2008.

Sell stock with a gain in January to defer recognition of the gain.

If you are 50 or older, and your employer's plan permits, you are eligible to make "catch up" contributions to your 401(k) plan.

You can contribute an extra $5,000 to your 401(k) plan in 2008 (for a total of $20,500).

You can contribute up to $5,000 to IRAs for yourself and your spouse. The $5,000 contribution is fully deductible if you did not participate in a company-sponsored retirement plan. You can make a "catch-up" contribution of an additional $1,000 if you are over age 50. You have until April 15, 2009, to make contributions to an IRA to be deducted on your 2008 income tax returns.

If you are self-employed, establish a Keogh plan by year-end. If the plan is in place by year-end, you can contribute up to $46,000 until the due date (including extensions) for your 2008 return.

If you are in business, delay sending out year-end billings so that the revenue will come in 2009.

• If you want to accelerate deductions into 2008:

Prepay your January mortgage payment to get the interest deduction in 2008.

Prepay deductible expenses and make charitable contributions before the end of 2008.

Use credit cards to get a current deduction even if payment of the charge will not be made until next year.

Because taxpayers have the option of deducting the higher of state and local income taxes or state sales tax, it may be appropriate to defer or accelerate the payment of the fourth quarter state estimated tax payment to take advantage of a higher sales tax deduction in 2008 and state income taxes in 2009.

Prepay any state and local taxes you estimate will be due for 2008 instead of waiting for their due date of April 15, 2009. If prepaying state taxes, make sure you check to see if the alternative minimum tax will apply to you because these taxes are not for that tax.

E-mail: Patti@spencerlawfirm.com