This is the best time of the year for all of them!
(Not there ever isn’t a good time for football, in my opinion…)
I’m sure you understand turkeys and football, but how this time of the year good for taxes? I know they aren’t due until April – but read the Tax Savings Tips, Advice and Strategies below to see how reviewing your tax situation now can save a lot of money before tax time!
Put off income (if you can).
If you expect to be in a lower tax bracket next year, consider deferring a bonus or selling investments for capital gains. If you have your own business, don’t do your billing until late December so that the income will be moved to next year. Of course, the opposite is true as well – if you are in a lower tax bracket this year, you may want to pull that income into 2017.
Move your deductible expenses to this year.
If you itemize deductions, consider paying deductible expenses such as large medical expenses, deductible taxes, etc before the end of the year.
Charitable contributions offer another deduction opportunity, if you itemize deductions. If you can, give as much as possible to reduce your taxable income. The bonus – you get to be a blessing to other people, which regardless of your tax situation, makes a difference in this world and makes you feel
Even if you don’t itemize your deductions, there a lot of not-for-profit organizations that “sell” tax credits. These help reduce your tax liability even more than an itemized deduction because they reduce the taxes you owe dollar for dollar. Some of them are even refundable – meaning you will get a refund even if you don’t owe any taxes! If you’d like a list of organizations in the Southwest MO area that have these available, contact me today!
If you are over 70 ½, there is another way to get a tax benefit from a charitable contribution. You can make a qualified charitable distribution of up to $100,000 directly from your IRA without increasing taxable income. The added benefit is that the charitable contribution counts toward your required minimum distribution, so this is something you should consider doing before receiving any other distribution from your account if you don’t need the cash.
Save for Retirement
If you contribute to a traditional IRA or make pretax contributions to an employer-sponsored retirement plan such as a 401(k), you are eligible for a deduction that will reduce your taxable income. If you haven’t already contributed the maximum amount deductible (which is $5,500 for under age 50 or $6,500 for over age 50), consider doing so before the deadline. At the very least, contribute the amount that will be matched by employer contributions.
In order to count for 2017, you have until April 17, 2018 to make IRA contributions or, if you are self-employed, your tax filing date, to make SEP IRA contributions. However, the sooner you fund the account, the sooner it has the potential for tax-deferred growth.
Take advantage of your tax losses.
What?! How can a loss be an advantage, you say? Well, if you plan to sell investments, such as stocks and mutual funds, that will result in a loss, you should do this is in a year you have taxable gains to offset. If your losses are more than your gains, you can use up to $3,000 of excess loss to offset other income. Losses exceeding $3,000 can be carried forward year after year, as long as you live!
Convert your Roth IRA
If you are in a lower tax bracket now than you will be later in life, consider increasing your current taxable income by converting all or part of your traditional IRA to a Roth IRA. Every dollar you convert is taxed at your current income tax rate. Since Roth IRAs do not have minimum required distributions, the goal is to lower your required distributions in later years when your tax rates may be higher and pay taxes on the money when your rates are lower.
The year after you reach age 70 ½, you must start taking regular minimum distributions from your traditional IRA and employer-sponsored retirement plans by April 1. (Some exceptions may apply). After that, annual withdrawals must be made by December 31 to avoid a penalty. Failure to comply with this rule will get you a steep 50 percent penalty! Don’t give your money away for no reason!!!