Before you start to shop for Christmas, remember to put something away in case you have taxes to pay. Tax time comes quickly after the holiday season and you don’t want to owe taxes as well as credit card bills! There are some things you can do before the end of the year to minimize your tax liability or even get you a bigger refund check. These simple tax saving tips can help a lot.
- GET ORGANIZED – Ask your tax advisor to send out your tax organizer early. This will give you a chance to gather all your invoices and receipts. You will also be able to see what you are missing and have ample time to obtain the missing documents. A well-organized tax package may also save you some tax preparation fees.
- DONATE TO CHARITY – Another good organizing tip. Clean out your closets and give clothes and coats to a qualified charitable organization. Don’t just drop them in a box, get a receipt, you will need documentation for non-cash donations. Also, if you volunteer at a local food bank or any qualified charity, you can deduct 14 cents per mile for driving to and from the charity.
- TAKE A CLASS – If you sign up for a class to enhance your career at an accredited college or university, you can receive a credit on this year’s taxes. Just make sure to pay the tuition before the end of the year. The Lifetime Learning Credit can be up to $2,000.
- CONTRIBUTE TO A RETIREMENT FUND – Any contribution to a traditional IRA (maximum limit $5,500 or $6,500 if over 50) or a 401K plan (maximum limit $18,000 or $24,000 if over 50), will reduce your taxable income dollar for dollar. These plans will be taxable once you retire and start taking distributions, but for now, the contribution will save you current tax dollars.
- OFFSET INVESTMENT GAINS – If you have capital gains on investments that you sold in 2017, chances are you have some losing investments also. Sell the losing investments before the end of the year to net against the gains. Any net losses can be applied to reduce regular income at $3,000 per year.
- PAY DEDUCTIBLE EXPENSES EARLY – If you have property taxes due in January or want to pay an extra mortgage payment, pay them in December. The expense is deductible in the year it is paid so rather than wait until next year to receive the tax benefits of these expenses, pay now and get a higher refund! This is also good advice for a business. Pay expenses early to lower your taxable income.
- MAKE SURE YOU HAVE HEALTH INSURANCE – The penalties for not obtaining health insurance are still valid. For 2017, penalties are 2.5% of household income or $695 per adult in the household, whichever is higher. The penalty is apportioned if you have health insurance for part of the year. If you don’t have health insurance, your federal tax return won’t be able to be efiled.
The best things you can do to save on taxes are to plan ahead and get a good tax advisor. Tax laws change every year and what you don’t know can and will cost you money!
Ellen Rose is a CPA with over 25 years of tax, accounting, and business experience. She is knowledgeable, client-focused accountants who make sure their clients get the best possible service and attention. Her accounting practice focuses on the needs of small businesses and start-ups. She is especially passionate about helping entrepreneurs succeed and thrive in today’s very competitive and challenging business climate. Sternbach & Rose, CPAs – Where you’re never just a number. Phone: 914-940-4449, www.sandrcpa.com