By: Melissa Rascon, The Rascon CPS Firm
Year End Tax Planning
As the 2017 tax year comes to a close there are a few tax planning tips for Individuals to consider. In reference to the current tax law, below is a list of those items that may help you save tax dollars if you act before year end.
- Consider using a credit card to pay deductible expenses before the end of the year. Doing this will increase your 2017 deductions even if you don’t pay your credit card bill until after the end of the year.
- Realize losses on stock while substantially preserving your investment position. You can do this by selling the original holding, then buy back the same securities at least 31 days later.
- Postpone income until 2018 and accelerate deductions into 2017 to lower your 2017 tax liability. This strategy may be especially valuable if Congress succeeds in lowering tax rates next year in exchange for slimmed-down deductions. Regardless of what happens in Congress, this strategy could enable you to claim larger deductions, credits, and other tax breaks for 2017 that are phased out over varying levels of adjusted gross income (AGI). These tax breaks include child tax credits, higher education tax credits, and deductions for student loan interest. On the flip side of postponing income, it may be helpful to accelerate income to 2017 if your filing status changes to a more favorable one (e.g., head of household vs. individual filing status).
- If you are expecting a bonus, it may be advantageous to try to arrange with your employer to defer the bonus until early 2018. This could cut as well as defer your tax if Congress reduces tax rates beginning in 2018.
- If you were affected by Hurricane Harvey, Irma, or Maria, keep in mind that you may be entitled to special tax relief under recently passed legislation, such as relaxed casualty loss rules and eased access to your retirement funds. In addition, qualifying charitable contributions related to relief efforts in the Hurricane Harvey, Irma, or Maria disaster areas aren’t subject to the usual charitable deduction limitations.
This is just a small list of items to consider in your year-end tax planning for 2017, keeping in mind the tax reform that is currently being proposed in Congress. By contacting us, we can tailor a plan that will work best for you.