The question is important now, because this is the time when people try to juggle their income and certain spending before year-end so they pay as little as possible in taxes when they file their return in a couple of months.
If you think your taxes will be lower for 2017 than this year, you will want to make smart moves now to cement as many deductions as possible for 2016. It also can be wise to try to delay taking some income until 2017, assuming you can control the timing of income such as a bonus or a payment from a client for work your small business has done.
"You can guess, but you don't really know," he said. So beware of making extreme moves like selling an investment now purely for tax reasons, when holding it for the future would make more sense apart from taxes. Whether tax changes are on their way or not, you can use these often ignored moves to cut your taxes this year:
Unload the extras from your closet. Give clothing, furniture or even cars to charity to get a deduction. But make sure you give to a charitable organization recognized by the
Give investments to charity. Instead of coming up with cash, consider giving stock, mutual funds or other investments to charitable organizations, including your church or other place of worship. The investments are more valuable than cash because neither you nor the charity will have to pay taxes for the gains in their value, or what's known as a capital gain. Seniors over 70 1/2 also have an attractive way to give. They can give to a charity directly from their individual retirement accounts. The gifts from IRAs get counted toward the withdrawals that the
Make a move. If you are going to be moving soon for a new job and can get the move done in the next few weeks you will be able to deduct the moving expenses on your next tax return, provided you move to be at least 50 miles closer to the new job than you would have been in your old home. Also, you need to be working full time.
Find a new job. If you are looking for a new job, you can deduct the expenses for your job hunt; including everything from printing resumes to traveling to another city for an interview if you aren't reimbursed for the trip. The expenses, however, have to exceed 2 percent of your adjusted gross income.
Go to the doctor. If you've had a lot of medical expenses this year, don't let them go to waste. To deduct them, they must total 10 percent of your income, or 7.5 percent if you are over age 65. You might get to the threshold by adding glasses, a dentist visit or nonurgent surgery. Transportation costs to the doctor also count.
Reduce your income. If you simply earn a salary, you don't have the control some people have. For example, with a small business you can bill a client at the end of this year so you get paid next year. But people do have the ability to reduce the income they will be taxed on if they stuff as much as possible into a 401(k) or IRA. You can put as much as
Pay your mortgage and local and state taxes now. If you have a mortgage payment or a state or local tax bill that's due in January, pay it this year so you can get the deduction.
Buy a car or boat. If you live in a state with no income tax, large purchases resulting in big sales taxes can be valuable for deductions. The
Pay for college. If you or your child is in college or a trade school, you can get a credit of up to
Also, if you are done with college and paying student loan interest you can deduct some or all of it, so make sure you are up to date paying off your loans. Either parents or students can claim this deduction, depending on the payments.
Sell losing investments. If you've sold investments that have gained value since you bought them, you will owe taxes on the gains if you are in the upper tax brackets. So consider selling a losing investment to offset the gain and avoid the taxes.
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