Reduce your tax liability?
With the new tax law set to be passed the week before Christmas, there are ways to look into the future and possibly take advantage of some current laws this year (2017). At the end of the year, most taxpayers are looking to make strategic moves to minimize their tax liability. Many more should be looking this year.
When the bill passes, new tax brackets and many other provisions will go into effect on January 1st. Most taxpayers will be in a lower tax bracket so deferring income into the new year and expensing items before the end of December should lower individual’s and business’ taxes for 2017.
Deferring income
Although most employees can’t change the day they get paid, most business owners can usually postpone recording income until the following year and in turn lower their tax bill
Individuals
It may be a time to look at your taxable portfolio and determine if there are any losses that can be taken against realized gains that will be currently reported.
Another creative way to reduce taxes at the end of the year is to double up on your mortgage or pay the property taxes on your residence and get a little more itemized deductions for the current year. Itemizing deductions will go away for many under the tax changes, so getting the most this year only makes since.
Making extra deposits into a retirement account (i.e. – 401k or IRA) will also reduce your income during the current year. If you have an employer sponsored retirement plan, be sure to try and make a slightly larger contribution for the last pay period of the year.
Businesses
Most of the time deferring income just puts off the paying of taxes, but the case this year could be different for millions of Americans. If individuals and businesses determine that they will be in a lower tax bracket next year, that in turn will mean that the income that is being deferred could be taxed at a lower rate.
We would never advocate spending money on equipment just to save taxes. Although, if a company sees the need for additional equipment in the next few months, we would recommend purchasing equipment for business use. Purchasing the equipment will allow more depreciation in the current year, and thus, reducing the tax liability of a company.
