Consider conducting a final tax planning review now to see if you can still take actions to minimize your taxes this year. Here are some ideas to get you started.
Begin by determining how your income this year will compare to last year. Then apply any tax implications this income change may cause. Be sure to account for the lower tax rates and the elimination of exemptions. Remember, if your income is rising, more of your income could be subject to a higher tax rate. Your higher income could also trigger a phase out that will prevent you from taking advantage of a deduction or tax credit formerly available to you.
“Conversely if your income will be lower, consider adjusting withholding or estimated taxes.” – Rich Middleton, CPA
Review any key events over the past year that may have potential tax implications. Here are some examples:
Tax changes for the current year are expected to be more impactful than we’ve seen in 30 years. Determine which of these changes will affect you. With these changes in mind, review your past income tax return to estimate what the impact may be on your upcoming tax bill. Please keep in mind that Congress has a habit of making last-minute changes, so you will want to plan accordingly.
One of the best ways to reduce your taxable income is to use tax beneficial retirement programs. Now is a good time to review your retirement account funding. Are you taking full advantage of your employer’s retirement plans? Are you saving money to invest in your future through various retirement savings options? If you are at least 50 years old by the end of the year, are you making the additional “catch-up” contributions allowed?
There are a variety of tax credits available to most taxpayers. Spend some time reviewing the most common ones to ensure your tax plan takes advantage of them. Here are some worth reviewing:
“More people will be eligible for the child tax credit than ever before because the taxable income threshold has been significantly increased. A married couple can earn up to $400,000 and still be able to take the credit. Additionally, you may get a $500 credit for children who are aged 17 or older even though they don’t qualify for the full $2,000 child tax credit.” – Julie Strohlein, CPA
Conducting a final tax planning review now allows you time to try to reduce your tax obligation. This is especially true if you are unsure of the specific changes made to the tax code. Remember some tax-saving ideas may require funding on your part. It is best to identify them now so you can save cash to take advantage of them prior to the end of the year.
“Then take a second look at your plan closer to year end to facilitate your tax avoidance strategies.” – Rich Middleton, CPA
“Once you determine your expected tax liability for the year, make sure your withholding is adequate. If it isn’t, you may need to make estimated tax payments or prepare to pay in with your tax return in April. Change your withholding right away so the same thing won’t happen again in the following year.” – Julie Strohlein, CPA
With so many changes in play, tax planning should not be overlooked in 2018. Contact Alloy Silverstein this fall to get a tax planning meeting on the calendar so you can be confident come 2019.
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