According to Benjamin Franklin, in this world nothing can be said to be certain, except death and taxes. There is no doubt in my mind that as a taxpayer, you would like to know a few tax tips that will put some money back into your pocket or save you some tax dollars. These basic strategic tax tips can go a long way to put money back into your pocket. Please enjoy this journey with me, as I walk you through what Uncle Sam will not want you to hear.
Tax Planning: The first and most important of all the below tips is “TAX PLANNING”. Strategic tax planning and projections will always show a taxpayer areas to minimize tax and maximize deductions or tax credits. Show me a taxpayer that does tax planning four times a year and I will show you a taxpayer with year-end tax savings.
Income Deferrals: Do you ever consider deferring your 2017 income to 2018? A small business owner can consider receiving bonus earned for 2017 in 2018 just to minimize tax liability on 2017 taxable income. Other options could be deferring billings and collections where necessary and also minimizing retirement distributions in the current year (2017).
Accelerate Deductions: Taxpayers and Small Business Owners should consider taking advantage of deductions that will minimize their tax liability. A good example for small business will be acceleration of bill payments in December 2017 to reduce 2017 taxable income. Individuals can also make January 2018 mortgage payments or State & Local estimated tax payments in December 2017 to take advantage of these deductions on 2017 tax return
Maximize your Pre-tax Retirement Contributions: Taxpayers with employer 401(k) plans should maximize their yearly pre-tax contributions (if possible) through payroll deductions. Taxpayers that are self-employed should consider Solo 401(K), SEP IRA or SIMPLE IRA plans. Taxpayers can also use pre-tax dollars e.g. IRAs, 401(k)s and other qualified retirement plans, which generally allow penalty-free withdrawals for college tuition.
Education Savings Accounts: The popular Section 529 plans and Coverdell education savings accounts are all compound tax-free when used for qualified higher education expenses. Taxpayers also get State tax benefit by deducting contributions to Education Savings Accounts. In some States, e.g. PA, GA, etc., the contributions don’t have to be made for the benefit of the taxpayer’s children, but can also be made for the taxpayer’s nephews, nieces, step children, etc. Although, some States limit the amount of deductions that can be deducted on the tax return, e.g. for PA the deduction is limited to $14,000 gift-tax annual exclusion amount.
Life Insurance Cash Values: Life insurance cash value is generally tax-free when used for qualified higher education expenses.
Estate Tax Planning: When last do you consider estate tax planning? Do you currently have a “Will” to protect your family from probate? God forbid anything happens to you. No time to waste anymore. Please reach out to us for your Estate tax planning.