What can I do to reduce the tax hit from my severance pay?

Q: I received a large amount of money in severance pay in 2003. What can I do to reduce the tax hit and save some of this money until I am in a lower tax bracket? - Dan, Newton

The following answer was provided by William Colangeli CPA, O'Malley & Colangeli CPAs PC, Bedford.

A: There isn't much you can do now, since it is after-the-fact. One possibility would be to contribute to an IRA but this will only help if you are able to deduct the contribution to the IRA. I would search hard for any deductions you might be able to claim for 2003. And maybe, if you don't need the severance pay, and you're in a high tax bracket, you can invest the severance pay in a tax favored manner. But only if this makes sense in terms of your total financial picture.