Year- end tax planning tips for high income earners
1) Accelerate deductions: Accelerate deductions in December to take the deduction in the current year. However, be aware of the items that may be subject to Alternate Minimum tax. AMT is an alternate tax calculation that has been established to ensure you do not take any excessive deductions. Items like property/state income taxes are not deductible under AMT. Contact a tax professional if you are unsure about the tax implications.
Few examples of accelerating your deductions include: prepaying January invoices in December, purchase computer equipment or any other machinery for your business in December.
2) Defer income: If you are a W2 employee, you can ask for the year-end bonus to be deferred to January instead of December. Same with Self-employed income, some of the invoicing work may be deferred if work was completed towards the end of the year.
3) Use the annual gift tax exemption: You can give up to $14,000 per year per individual to as many people as you wish and the amount increases to up to $28,000 if you and spouse both make gifts.
4) Health savings account contribution : You can contribute up to $6,750 per family and $3,400 for self-only. If you are 55 or older as of December 31, 2017, you may be eligible for another $1,000.
5) Review your investment losses: Sell your loosing positions in stocks. If your losses exceed your gains, you can take up to $3,000 to reduce your taxable income.
6) Review your shared expenses : If you are using cell phone, computer, car any other equipment for personal and business expenses, this may be a good time to allocate prior to year-end and take that deduction.
7) Max out retirement contributions: For 2017, the following are the maximum contributions permitted:
401k - $18,000 (additional $6,000 if you are older than 55)
Traditional and Roth IRA - $5,500 (additional $1,000 if you are older than 55)
8) Business owner retirement plans: This is often most overlooked tax deduction.
9) Donations to Charity:
There is still time to make donations for charity. As long as you mail the check prior to the end of the financial year or send any non-cash charitable items, you may be able to take this deduction. Ensure you store and track receipts
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