The Holiday season is a time for giving, but we don’t have to give too much to the government, do we? You have roughly 45 days to implement tax planning strategies.
Are you lending money to the Government at zero percent interest? Stop! Here are a few strategies to lower 2016 taxes right now!
Particularly if this year will be a higher tax bracket year than next year, prepay deductible expenses in 2016 instead of 2017. Pay expected 2017 medical and dental expenses in 2016, Prepay mortgage payment or property taxes. Clean out those closets and contribute to your favorite charity. Prepay expenses of doing your job, such as pilots’ travel expenses. Pay for home improvements that qualify for home energy tax credits. Taxpayers age 70 1/2 and older can make direct gifts from their IRA to Charities:
Prepay deductible expenses.
This includes prepaying medical or dental expenses. You can deduct medical expenses only to the extent they exceed 10% of Adjusted Gross income. So pay for those braces in advance.
If this year will be a higher tax bracket year than next year, make your mortgage payment or property tax payment in December.
Employee expenses. If you have unreimbursed expenses of doing your job, you cannot deduct these except to the extent they exceed 2% of adjusted gross income. So prepay these expenses. For example, buy that laptop this year. If you are a pilot, keep records of paying visas, job-related insurance, passport & photo costs, required education and testing, logbook, electric converters, batteries, headsets, manuals, kit bag, etc. Look into Pro-Diem.
Home energy tax credits 2016 law retains some credits for energy-saving items added to your home, such as windows, insulation, roofs and doors. It stays at 10% with a $500 maximum. Any credits taken in prior years count against the $500. And many items are capped: No more than $50 for circulating fans, $150 for furnaces and $200 for windows. Solar panels qualify you for a credit for 30% of the total cost.
Divorce IRA trick. An IRA contribution is a good tax saver, and it can be made as late as the time for filing your tax return, including extensions. Did you know: An IRA contribution cannot exceed your earned income but alimony counts as income for this purpose.
Donations of clothing and household items. These donations cost you nothing and make your house more livable.
A donor-advised fund is a vehicle that allows you to make an immediately deductible contribution to a charity, from which you can recommend later grants to qualified charities. It counts as a tax-deductible donation to the organization sponsoring the fund. But you advise the organization on how to grant the money out to your favorite charities. Your donation is also invested based on your preferences. Get more information from the Community Foundation of Greater Memphis of
Gifts From Senior IRA To Charities: Seniors age 70½ and older give better. Each year they can transfer up to $100,000 from their IRAs directly to charity. It satisfies your required minimum distribution but is not added to your taxable income, so they don’t trigger phase-out’s of your itemized deductions or personal exemptions or trigger a Medicare premium surcharge. One of my clients, John, a retired banker, and his wife each make $10,000 gifts like this monthly during the year. Your broker should have forms for making such gifts.
My Advice: If you want to get the most out of year end planning ask me for my *Free ½ hour Consultation.* My Tax Mastery© planning will identify everything you can do this year.