Some Tax Deductions That You Rely On May End on December 31st. Here's What You Need to Know. And what you need to do. Now.
How people of color celebrate the holidays all over the world!
Max Contributions to Your Retirement Accounts
Plainly expressed – every time you contribute to your 401K you lower your taxable income. You can contribute up to $18,000 to your 401K each year. And you can contribute $5,500 to an IRA if you’re under age 50, and up to $6,500 if you’re over age 50. Also keep in mind that you actually have up to the April 15th tax filing deadline to contribute to an IRA. So if you don’t have an IRA, you might considering opening one with the minimal amount required before December 31, 2017.
Things go a bit differently with the Roth 401K and Roth IRA. In that case, you do not get the tax break for 2017, BUT your money gets to grow tax free AND withdrawn tax free when you are in retirement.
Pay Down Your Medical Deductible
Take a minute to find out what’s left in your medical flexible spending account. Spend that money before the end of the year. Get those new glasses you need. Fill up on prescriptions. Make an appointment for dental care your policy does not cover, like finally getting that new filling.
Tally up your medical expenses to date. Do you think they will exceed 10% of your adjusted gross income? If so, factor this in: that deduction could drop to 7.5% under the RePub tax plan. You can deduct everything you spend over 7.5% - BUT you can't do it if you have an FSA or health savings account. That would be double dipping.
And be sure to confirm whether your employer provides a short grace period or rollover. Generally speaking, most FSA funds are use it or lose it.
Give to Charity to Increase Your Deductions and Lower Taxable Income
When you give – you get to legally double-dip. You support a worthy cause and you lower your taxable income. Here’s why it’s important to do so in 2017. If the RePub bill passes – the resulting standard deduction will double, thereby reducing the number of people who itemize, and consequently lowering operational funding for non-profit organizations that need it most.
And don’t forget – that means non-cash contributions, too --- furniture, clothing, equipment and more. So make time to clean out those closets and your garage.
Make 2017 the year to give as much as you can. You’ll help yourself and others.
State Sales Tax Deduction
IF (and that’s all caps, bold face) your budget can afford big ticket major purchases, like appliances, computers, and electronics – start bookmarking and wish listing items. If the RePub plan passes before end-of-year --- make the purchases because 2017 will be your last year to deduct State taxes.
Another IF in the RePub plan is to eliminate mortgage expense deductions. That elimination will hit many homeowners hard. So if possible (there goes that word IF again) make additional mortgage payments by December 31, 2017.
Miscellaneous Expenses At-Risk
Miscellaneous expenses, such as job hunting, work-related travel, unreimbursed employee expenses, union dues, hobby expenses and — yes — tax prep, add up but they can also be deducted if they exceed 2 percent of your adjusted gross income. Just make sure to document all of the expenses you have for this year.
Warning for Freelancers, Consultants and Self-Employed
All of these tips particularly hit you because you typically self-fund your business operations, pay for your own health insurance, and make major purchases out-of-pocket. So take time to think about ways to save on your 2017 taxes. Leverage current deduction opportunities. Now. Before many of the deductions that you used in the past come to an abrupt end.
Do Your Homework. Speak With a Professional.
Get familiar with IRS guides and limitations. Speak with a professional tax preparer. They stay on-top of legislation, the impact of changing rules and regulation. So get some guidance now to cover your best individual financial situation and interests.
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The Republicans are hell bent on passing their tax reform legislation (Tax Cuts and Jobs Act) by the end of 2017. If they do – here’s what you need to do. Now. That way you can take advantage of current deductions before they go away or are reduced. Make sure you maximize your refund for 2018.
Or lower your tax liability.
Gather Your Filing Data Now
Don’t wait until 2018 to start scouring through your receipts and data. Within that information lie clues to where you might want to beef up expenditures that could be at-risk if the tax reform legislation passes, such as State sales tax deductions, mortgage payments and more. Look at where your current expenses are now to see where you might want to make additional purchases and payments – before the deduction is lost.