FINAL YEAR END TAX TIPS
FINAL YEAR END TAX TIPS
If you wish to see if you are saving on 2017 taxes, then now is the time to be planning. If you wait until January 2018, it may be too late, so look now.
Here are a few examples of ways to reduce taxes....
Increase Itemized Deductions on Schedule A:
Prepay your Estimated Tax for the State and City in December rather than waiting for January 2018. Or maybe increase your withholdings on your final paychecks for your State if you believe you will owe. If, and it is a big if, the proposed tax law goes into effect, you will not be able to claim State and Local Taxes on your 2018 Schedule A.
Medical Expenses. If you are close to 10% of your AGI with medical expenses (7.5% for Seniors), get any planned or needed tests or procedures completed in 2017 to push you over that 10%, or get you a larger deduction on Schedule A.
Charitable Contributions. Either clean out the attic and donate it to a legal charitable organization, or give money to your favorite church or legal cause to increase your deduction for 2017. If, and again it is a big if, the proposed law takes effect in 2018, the standard deduction will double which means fewer people will be able to itemize so that the charitable contribution will not help tax wise. I would be remiss not to state that charity, deductible or not, is always a good idea since it helps so many people in need.
Retirement Accounts. This is always a priority. Contribute all you can to your 401K, IRA, SIMPLE, SEP, etc. These always reduce your AGI, or taxable income. Though not an immediate savings, a Roth IRA is very beneficial since the distributions in retirement are not taxable.
Real Estate Tax. Pay your real estate/property tax in December to claim the deduction in 2017. You deduct it in the year paid. As stated above, it may do you no good in 2018 if the standard deduction is increased to $24,000 (not that the increase standard deduction is not helpful to a family of 3 or less).
Finally, try to defer income, or accelerate expenses into 2017 if you have a business. More expenses means less taxable profit for 2017, but potentially more income in 2018. If you have a choice on bonus payments, delay until 2018 to postpone the tax, and potentially a lower tax rate, if the proposed tax bill does what it is intended to do.
In summary, none of these will work in 2018 for this year's taxes, with the exception of the IRA instruments. Obviously, you do not want to use up all your cash paying expenses or giving to disaster relief if you cannot pay your day to day expenses, but if you have the extra cash, it is a way to save on taxes-legally!