Tax Tips That Will Put Tax Dollars Back Into Your Pocket (Part 2)

Somebody said “the main thing is to keep the main thing, the main thing”. The main objective of this blog is to show taxpayers tax tips that can save taxpayers some tax dollars.

Charitable Giving: This is another pretty good way of reducing your tax liability. Taxpayers can generally deduct cash or non-cash charitable donations not more than 50% of their adjusted gross income.  In certain situations the deductions is limited to 20% or 30%, e.g. 30% of AGI deductions for donation of appreciated stock to public charity but the deduction for private foundations is limited to 20% of AGI.

Take Advantage of Tax Loopholes: There are so many loopholes in the tax codes that taxpayers can take advantage of. If you like to take advantage of these loopholes, please reach out to us to review the last two prior years of your tax returns to make sure no tax loophole is missing on your tax return. Remember you only have 3 years statute of limitation to get any money back from Uncle Sam.

Gift Taxes: Watch out for gift taxes. Limit any gifts to children, nieces, nephews and family members to $14,000 per person. If your gift is less than the $14,000 threshold, no gift tax return is required by IRS.

Take Advantage of 2 years Net Operating Loss Carryback: If youhave any current year losses that you cannot use, remember to carryback the losses against prior year taxable income.

 

Avoid the Alternative Minimum Tax (AMT): For individuals, the 2017 exemption begins to phase out at $120,700; for married couples filing jointly, it begins at $160,900. For 2018, AMT phase-out amount for individuals is $123,100 and $164,100 for married couples filing jointly. AMT excess taxable income is taxed @ 28%. Taxpayers can avoid the AMT tax by looking at 2016 and then review the 2017 items that triggers or increase AMT in 2017. The good news is that the current tax proposal will eliminate AMT tax. Let’s keep our fingers crossed until this is passed into law.

Take Advantage of Tax Credits: Unlike tax deductions, tax credit is a dollar for dollar deduction, so tax credits are more beneficial than tax deductions. A $1,000 tax deductions can save you about $350, if your tax bracket is 35%, but a $1,000 tax credit will actually save you $1,000 in taxes. Consider energy efficient home credit, adoption credit, dependent credit and the earned Income Tax Credit.

Consider a Roth IRA Conversion: Roth IRA contributions are generally made with after tax dollars, so qualified distributions are tax free. I will suggest taxpayers with potentially taxable estates should consider Roth IRA conversion, since this could save future tax dollars. Please note that Roth IRA Conversion is not for everyone. Contact us to see if Roth IRA conversion is good for you.

 

Take Advantage of pretax contribution to a health savings account (HSA)/Flexible Spending Account (FSA). Have you ever consider contributing to HSA or FSA? Contributions to HSA or FSA are made with Pre-tax dollars. A HSA is used with a high-deductible healthcare plan to save for qualified medical expenses. For 2017, a family may contribute up to $6,750 ($3,400 for individuals), and if you’re 55 or older, you can contribute an additional $1,000. Amounts in the account not spent in the event of an account holder’s death can transfer to a spouse on a tax-free basis or another named beneficiary as estate income.

Information contained in this BLOG should not be construed as the rendering of specific bookkeeping, accounting, tax, consulting or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will Core Financial Outsourcing, Inc. be liable for any damages – direct or indirect or consequential – claimed to result from use of the material contained in this BLOG. Persons are encouraged to consult with their Core advisor BEFORE making decisions.

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