Most people don’t even think about federal income taxes until January, or even as late as March or April each year. But this can often be a mistake, since some decisions that you make before December 31 each year will greatly impact that year’s tax burden. So, before the holidays get into full swing, you might want to take a look at your likely income tax liability for 2017 – and at ways you could reduce your bill.
Standard deductions, or itemized deductions? The IRS has raised standard deductions just a bit this year, to the following amounts:
- $9,350 for heads of household (up 50 dollars)
- $6,350 for singles or married taxpayers filing separate returns (up 50 dollars)
- $12,700 for married couples filing jointly (up 100 dollars)
You can reduce your Adjusted Gross Income (the amount of income that is taxed) by these amounts. But it is possible that you can get a bigger break by itemizing deductions. Begin researching and identifying deductions now, because certain decisions that you make by December 31 could help you save money on your federal income taxes.
Make charitable donations by the end of the year. One of those valuable deductions is the charitable donations write-off. Since you can only claim a deduction for donations you made before December 31, now is the time to investigate your options.
Retirement plan contributions. Contributions to certain qualified retirement accounts are made on a pre-tax basis, lowering your overall taxable income for the year. Check your contributions for the year to see if you’ve reached the maximum contribution of $18,000 for 401(k), 403(b), or Thrift Savings Plans. If you’re age 50 or over, you can contribute an additional $6,000 to these retirement accounts.
Credits. Tax credits actually offset your amount due, and can even result in a refund. Since some credits (such as energy-based credits) require you to take certain actions by December 31, research your potential tax credits now.
No one really likes to think about taxes, but if you take action now you might thank yourself in the spring. Give us a call if you need to talk about those retirement plan contributions, and we can help.