Based on our current tax laws, here are a few simple ways to reduce your taxable income for 2017:
1. If you are a business owner and have sufficient cash flow, consider pre-paying expenses.
2. Max out your retirement contributions. The time value of money is an amazing thing, so contribute as much as possible for retirement that you can afford.
3. Make a charitable contribution. Charitable planning can be a powerful tool, and for those who currently itemized their deductions, charitable contributions are tax deductible.
4. Get your state and local tax estimated payments in before the end of the year to be able to take your state and local tax deduction and avoid penalties.
Based on the recent Tax Reform legislation, here are a few simple steps to maximize savings strategies this year for deductions that may not be available to you in the coming years:
1. If you take the miscellaneous deduction, pre-pay investment advisory fees.
2. Pay down home equity loans. Mortgage interest on home equity loans will not be deductible starting in 2018.
3. Pre-pay real estate taxes. Since the standard deduction is increasing, many people will no longer itemize deductions. Therefore, pay your itemizable expenses, such as real estate taxes, this year and get the benefit of a greater deduction this year. Note: While income taxes cannot be pre-paid, real estate taxes can!
4. Set up a Donor Advised Fund. In the coming years, deductions for charitable contributions will be less available to many taxpayers because of the higher standard deduction, and so you may consider setting up a charitable giving fund like a Donor Advised Fund so that you can aggregate your charitable contributions every other year or every couple years to be able to take advantage of a large charitable contribution, which may allow you to itemize your deductions in those years that you make a contribution. Donor Advised Funds are a great way to deposit your charitable contributions into a fund that you control, take a deduction in the year in which you make the deposit, and wait to make grants until you are ready to do so.
As always, make sure you are consulting a tax professional for your tax reporting, payments, and planning.