Tax planning might be the last thing you want to think about at this time of year! But because many tax breaks are based on actions you took before December 31, you don’t want to become a victim to hindsight. Before the holidays take over most of your free time, consider the following steps to get yourself into a more “tax friendly” situation by the end of the year.
Research itemized deductions. The IRS did raise standard deductions a bit, to the following amounts:
- $9,350 for heads of household (up 50 dollars)
- $6,350 for singles or married taxpayers filing separate returns (up 50 dollars)
- $12,700 for married couples filing jointly (up 100 dollars)
However, it is probably in your best interest to itemize your return instead. Take this time, between now and December 31, to research any new tax deductions that might be available to you. Most of these will be based upon expenditures during the calendar year.
Consider charitable donations. Many of our clients enjoy a sizable tax deduction for charitable contributions. But remember, those donations must be made by December 31 if you want to count them toward your 2017 tax return.
Credits. Tax credits are extremely valuable, since they directly offset your tax bill. Take the time to research various credits that might be available to you.
Retirement plan contributions. Contributions to qualified retirement plans are made on a pre-tax basis. This lowers your overall taxable income, and can lead to a significant savings for you. This year you can contribute up to $18,000 dollars to your 401(k), or $24,000 if you’re age 50 or over (via “catch-up” contributions).
Taking just a few minutes in the fall, to investigate potential tax savings opportunities, can add up to a significant savings in the spring. Remember, if you have questions about retirement plan contributions, opening and funding an IRA, or any other financial planning matter, you can give us a call and we’ll be happy to help.