Are You Ready for Tax Season?
The end of the year is here, are you ready for tax season? Tax planning is something that should be done earlier in the year, but if you have not had the chance to do so, here is a little Year-End checklist to help you get ready.
*Bunch your deductible expenses. Taxpayers who itemize do have deductions that must be more than a certain threshold amount. Medical and dental expenses or miscellaneous expenses, which include business expense claims. To get over these deduction hurdles, start consolidating these expenses now. This will push them into one tax year where you can make maximum tax use of them.
*Consider charitable giving. This is a great time of year to clean out your closets and garage or make cash donations to your favorite charity all by December 31. Just remember to hang on to your canceled check or credit card receipt or itemized receipt from the charitable organization as proof of your donation. If you contribute $250 or more, you’ll also need an acknowledgment from the charity. Charitable donations are deductible only if you itemize your deductions.
*Consider contributing more to your 401(k) or similar employer-based retirement plan. Maxing out your contributions by year-end, can lower your tax liability and may entitle you to the savers credit as well.
*Settle insurance claims. You may want to settle an insurance or damage claim in order to maximize your casualty loss deduction this year, if you itemize your deductions.
*Take required minimum distributions (RMDs) from your IRA, 401(k) or other employer-sponsored retirement plan. RMDs from IRAs must begin by April 1 of the year after you reach age 70½. Failure to take RMDs can result in a penalty of 50 percent of the amount of the RMD not withdrawn.
*Strategize HSA contributions. If you become eligible in December of 2017 to make health savings account (HSA) contributions, you can make a full year’s worth of deductible HSA contributions for 2017 in December.
*Review your portfolio, your positions and revisit your asset allocation. Modifications should be based on changes in your life, priorities, risk capacity, and time horizon. Do you have any taxable gains that you may want to offset with some losses?
*Make your January mortgage payment by Dec. 31. This will allow you to deduct the interest from that payment on your coming tax return. The same is true for early property tax payments, but only if you itemize.
*Pay college cost early. The spring semester’s bill is not due until January, but it might be worthwhile to pay it before year’s end. By doing so, you can claim the American Opportunity Tax Credit or the Lifetime Learning credit on this year’s tax return.
These are just a few of strategies you can do. Do not hesitate to contact us for assistance with implementing these and other year-end planning strategies that might be suitable to your particular situation.
