New tax rates and other provisions will go into effect on January 1. Below are several things you can do this year to take advantage of the changing tax code. Be sure to schedule an appointment with us before the end of the year to discuss if any of these strategies could benefit you.
- Give to charity
Giving to charity is common advice at the end of each year. However, with the tax reform, charitable giving could be more effective this year. If your tax rate will fall in 2018, your deductions are more valuable if claimed against this year’s income. Even if your tax rate is going up next year under the new bill, you may still want to make extra charitable donations in 2017. Most deductions can only be claimed if you itemize your tax return and the new tax bill would limit the number of taxpayers who would benefit from itemizing. If you can afford it, it may make sense to make extra charitable donations this year to maximize your deductions.
- Defer income
Deferring income is another traditional recommendation at the end of each year. In most years, deferring income essentially delays the taxes you will have to pay eventually. But, if you expect your tax rate to fall next year, deferring income into 2018 could actually save you money.
- Pay your taxes
The tax bill would limit how much state and local taxes can be deducted. However, taxpayers could prepay property taxes due in 2018, and deduct them under the old rules.
- Employee expenses
Current tax law allows employees to deduct unreimbursed expenses related to their jobs as long as they’re more than 2% of income. The tax bill ends these itemized deductions after the end of this year. Workers should consider paying for as many of these expenses as possible before the end of this year to maximize the deduction.
- Pay for your move
The tax reform bill will remove deductions for work-related moving expenses. While it is unlikely that you can schedule a move on short notice, if you did move this year, make sure you have paid for all moving-related expenses by December 31.
- Hire a tax preparer
After January 1, taxpayers will no longer be able to deduct tax preparation fees. However, any payments to accountants or tax software companies made this year, will still be deductible on tax returns filed in April.
- Give to charity
End of year tax planning can help you significantly save money on your taxes, especially now that the tax code is changing. As we approach the end of the year, it is the perfect time to schedule an appointment with your CPA to discuss if these strategies would be beneficial for you and your business. Contact us today to schedule an appointment.