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2017 Year End Tax Savings Strategies

Happy Holidays!

As we are now in the last week of 2017, I thought it best to point out a few tax-saving strategies that can still be implemented before the 2017 tax year ends. I know that with all of the excitement of the holidays and family being in town, taxes are the probably the last thing on your mind, but it only takes one of the strategies listed below to possibly help to lower your 2017 tax bill.

As always, please contact someone at our firm should you have any questions about the information below and how it applies to your individual tax situation.

Year-End Tax Planning for Individual Taxpayers

• Prepay your mortgage payment that is due on January 1, 2018 by December 31, 2017. You can deduct the interest on your 2017 tax return.
• Charge deductible expenses like medical bills, state and local taxes, real estate taxes and charitable donations to your credit card. By charging these expenses now, they become deductible in 2017 even if you do not pay the credit card bill until next year.
• Pay your state estimated tax payment that is due on January 15, 2018 no later than December 31, 2017. This will count towards your itemized deductions on your 2017 tax return.
• Sell stock losses before the year ends. This will help to offset any capital gains and possibly enable you to take a loss of up to $3,000 on your 2017 tax return.
• Maximize your charitable contributions and donate unwanted items before the year is over. Please try to document the items that were donated and take pictures as well if possible. Also, hold on to the receipts that you receive when donating.
• Exhaust all of the funds contributed to your Flexible Spending Account (FSA) by year-end. You may be able to charge expenses for 2017 through March 15, 2018, but please verify this with your employer as this is at their discretion. Any remaining funds after the spending deadline are forfeited.

Year-End Tax Planning for Business Owners

• Cash-basis taxpayers, pay any outstanding bills by December 31, 2017 (this includes mailing the check on December 31, 2017). This will allow you to deduct the expense in the current tax year even though the payments may not be deducted your account until January 2nd or 3rd or later.
• Also for cash-basis taxpayers, remember that all payments that are received on or before December 31, 2017 are included in the current year’s income.
• For accrual-basis taxpayers, write off any non-collectible accounts receivable before the year ends.
• Also for accrual-basis taxpayers, remember that your revenues are calculated based on what you invoice and bill between January 1, 2017 and December 31, 2017. Any work performed after December 31, 2017 will be included in income for the 2018 tax year.
• Write off any obsolete inventory as of year-end.
• If you are planning on upgrading your computer or any other business equipment (machinery, vehicles, etc.), try to do so before year-end. This will also allow you to take advantage of any holiday promotions that are in effect and in most cases you can write off up to the entire purchase amount (against profits) for the 2017 tax year. If you are facing a profitable year and therefore, higher taxes, this could offer an instant last-minute deduction for your business.

The tax reform bill that was passed a few days ago has a lot of different changes that will affect taxes for both businesses and individuals for many years to come.  Since there are so many different areas of the tax code that have been affected, we will post a blog to our website next week to cover all of the major changes that have been signed into law.

One big change that affects individual taxes that we will cover briefly is the doubling of the standard deduction for tax filers.  This means that beginning with the 2017 tax return, it may be beneficial to take the standard deduction even if you have typically itemized in the past.  For now, below is a list of some tax moves that itemized filers may want to consider making before the year is over due to the new tax reform that will make tax deductions very different in 2018.

• Pay your state income taxes by December 31, 2017 – this was mentioned above also, but since a lot of people may not end up itemizing their deductions when filing their 2018 taxes due to the new tax laws, this will be a better deduction on the 2017 tax return.
• If your property taxes are more than $10,000 per year, prepay next year’s taxes by the end of this year.  The new tax laws limit property tax deductions to $10,000 per year, so making this payment in this year will still allow you to claim more than $10,000 on your 2017 tax return.
• Make your 2018 charitable donations now instead of next year.  You can also charge these, and they will count as being paid in 2017 even if you pay the credit card bill in 2018.  This is necessary due to the increase in standard deduction that may make charitable donations in the future not as deductible as they are with today’s tax laws.
• If you live in a state that does not have a state income tax, consider making any large purchases (automobiles, boats, etc.) this year instead of next year to be able to take advantage of the state and local sales tax deduction.

Please remember, the information above contains general tax-savings information and it may or may not apply to your particular situation. It is strongly advised that you contact Shurek Accounting & Tax or your own tax adviser before making any of the moves listed above if you are not sure as to their deductibility.

Shurek Accounting & Tax would like to thank you for your business this past year and we hope that you and your family have a safe and enjoyable holiday season.