Are you dreading the 2017 tax season? Do you want to be a little more prepared than last year?
The end of the year is approaching quickly. If you want to ensure you’re ready when it’s time to pay your 2017 taxes, there are a few things you need to keep in mind.
Here are five tax planning tips you should think about before the end of the tax year.
5 Tax Planning Tips for 2017
1. Prepare Your Deductions
Some of the best things to think about with your taxes are deductions. It’s important to do your due diligence and find out what you can write off.
You may be eligible for more deductions than you think. If you’re self-employed, your home office expenses and business expenses are deductible. If you’re making payments on student loans, you may be able to deduct the amount you’ve paid.
Charity donations are also deductible. If you’ve donated large sums of money to a local charity, you may enjoy some tax benefits.
You should also take note of other special deductions you may be eligible for. This could be something like the IRS Mortgage Interest Deduction, which can allow you to deduct home mortgage interest.
2. Consider Your Retirement Plan
It’s a great idea to save for retirement regardless of the tax benefit. You might even be able to deduct this money from your total tax bill.
A tax-deferred retirement account such as a Traditional IRA or 401(k) allows you to deduct any money you save. However, you should know your contribution limits and plan accordingly.
Depending on your earnings, you might also be eligible for other options such as the Retirement Savings Contributions Credit.
3. Get Those Forms Ready
Depending on your circumstances, you may need to prepare several forms for your tax season.
If you paid any contractors or subcontractors over $600, for example, you’ll need to file some 1099 forms. You’ll also need to send these out by January 31st.
There could also be other forms to fill out that need to be ready before your taxes are due. Do your research and plan accordingly so you’re not caught in a mad rush down the road.
4. Brace for Red Flags
You should also be ready for any red flags the IRS could see when you file your taxes. Sometimes you can’t help the way your income or tax profile appears from the outside.
If you’ve made any big charitable donations, for example, the IRS may take notice. You might also be under higher scrutiny if you have a very high income.
Be aware that you may have a greater risk of getting an audit if you have too many red flags. It never hurts to be prepared for the worst.
5. Look For Taxable Income Reductions
The last of our tax planning tips is to look for ways to reduce your adjusted gross income, or AGI, for the year.
If you’re a freelancer or you’re a self-employed small business owner, you might have some flexibility. You may be able to postpone some of your invoices until January arrives.
If you’re an employee who expects a large holiday bonus, you may want to ask your employer if you can receive the check in January instead.
Additionally, you may want to look into ways to avoid the Alternative Minimum Tax. If you make over $53,600, you might need to pay additional taxes. If you’re close to the cutoff line, you may want to look for ways to reduce your AGI.
There’s a lot to consider when it comes to filing your taxes.
The tax planning tips above are a great start that will help you to optimize your taxes. This way, you’ll be a little better prepared when April rolls around.
Looking for professional CPA services in Boise? Contact us today for a free tax consultation.