As 2017 draws to a close, tax season will be upon us before you know it. Whether you are expecting to get a big income tax refund or write a big check to Uncle Trump, the goal is always to pay as little in taxes as you are legally required to. This year, there are a few things that are different or more important than other years, in large part because of the massive tax overhaul that is working its way through the legislature. Whether some version of the bills become law or not is anybody's guess, but its always best to prepare for the worst and hope for the best!
Here are a few tips to help you save money on taxes:
1. Pay any accrued interest on your student loans on December 29, 2017. You have to pay Aunt Sally anyway, so cut your January check a little bit early to enjoy the interest deduction. Generally speaking, you are allowed to deduct up to $2,500 of student loan interest paid during the calendar year 2017 (subject to income limits). This deduction is one of my favorites because it is an "above the line" deduction so you will not be required to itemize your deductions to take advantage of it. It may be out the window for 2018, so you should maximize it this year if you can. ***Note: Some servicers acknowledge payments on weekends and you may actually be able to pay up until December 31, 2017.***
2. Pay that property tax bill early. One of the biggest deductions that homeowners enjoy is a deduction on taxes paid to their local and state governments. That means not only income tax, but also property tax. Depending on your county and/or municipality, the due date may be in 2018, but that does not mean that you can't pay them early to increase the deduction. For those with very high property tax liabilities, this may also be the last year that your tax liability is virtually unlimited. The bill working its way through Congress will limit the deduction to $10,000. If you fall into a category that pays more than that in property taxes, pay all of the taxes that are going to be due in the early part of 2018 early and let's discuss ways to maximize this deduction in the future. I have some ideas but it is dependent on your specific situation.
3. Contribute to that IRA. You can contribute $5,500 towards your IRA in 2018 for an above the line deduction. If you are over the age of 50, you get an extra $1,000 (subject to income limits). If you are a lower income taxpayer, you may also be eligible for a retirement tax credit of up to 50% of your contribution. This is another of my favorites because you actually save taxes while saving for your future, it is above the line, and it allows you to contribute up until April 15, 2018 and still take the deduction for 2017. This deduction also looks like it is on the way out, so take it now while it is still available.
4. Buy a new electric car. If you are in the market for a new car, an electric vehicle might be a good option for you. The federal government is giving a tax credit up to $7,500 for the purchase of a new electric vehicle. Some states also have an additional credit for state returns. In addition, the sales tax (TATV) that you pay for the vehicle may also be deductible on your tax returns. I do not encourage anyone to incur debt that they can't afford to take advantage of this credit.
5. Pay your December mortgage early. Along the same lines as paying property taxes and student loans early, you may be able to save a few bucks by paying your January mortgage payment in December. Most lenders will give you credit for the interest paid on your 1099 for up to 13 months per calendar year. This only works if you are itemizing your deductions.
6. Give to your favorite charity or church. Charitable contributions are deductible in the year that they were given. There are many well-deserving charities that can truly improve the lives of you, someone you know, or even a complete stranger with the donation that you give them. For every passion that you have, there is a charity for it. Here is a list of our favorites. Note: Non-cash donations in excess of $500 will need an appraisal. This will only be a tax deduction if you itemize your returns, but I always encourage you to be charitable regardless of your tax savings.
7. Start that business and work towards financial freedom. If you are considering starting a business, money that you put in will probably reduce your income (thus reducing your taxes). Since most businesses lose money their first year (especially if you start it this late), you will probably be looking at a loss. Starting a business is the hardest thing that you will ever do, but the rewards are priceless! If you've always dreamed of being your own boss, you may want to consider it before the end of the calendar year.
8. Get that medical procedure. If your out of pocket medical care was more than 10% of your income, you can deduct that portion that exceeds 10% when you itemize deductions. While not a tax savings, if you have already met your deductible, it might make sense to get it done now before your deductible starts over for the new year.
9. Enroll in a health insurance plan. It doesn't look like the Affordable Care Act is going anywhere anytime soon (again, I could be proven wrong). For now, it's here. President Trump took executive action to change the way that it was interpreted, which made health insurance premiums go up. The good thing about the premium increase for people eligible for a subsidy, some plans may not cost you a dime! Enrollment will not help you for the 2017 tax season, but since there is a small open enrollment period for the healthcare exchange (excluding a special enrollment in limited circumstances) so I thought it would be worth mentioning here because lack of health insurance could cost you big!
10. Contact Simplified Document Solutions for a free consultation. Simplified Document Solutions will take a look at your situation and offer a free, no-obligation consultation to discuss ways to reduce your tax liability from now until the end of the year. Simply go to my website, www.249bankruptcy.com and schedule a tax consultation appointment at your convenience. When you come in, please bring a copy of last year's tax returns.
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Simplified Document Solutions offers affordable tax and bankruptcy solutions to individuals from our Atlanta, Georgia based office. Our office is located in Atlantic Station in Midtown Atlanta at 201 17th Street, N.W., Suite 300, Atlanta, GA 30363. You can reach us at (678) 490-5841 or via email at 249bankruptcy@gmail.com.
Congress has designated Simplified Document Solutions as a debt relief agency. Part of our business involves assisting individuals obtain affordable relief under the United States Bankruptcy Code.
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