With almost three-quarters of the year squarely behind us, now is a great time to assess your tax situation. Even though tax law changes are up in the air again this year, here are five moves, with the help of your tax professional, that you should consider right now.
One – Deductions and Credits
Look at last year’s tax return and determine if you are at a point to get a good estimate of your deductions and credits. If your deductions are less than half of what they were for the full year, you will end up paying more tax. Now would be a good time to clean out the kids closet or the garage and make an in-kind charitable donation.
Two – Investment Portfolio
Many people wait until the end of the year to do tax loss harvesting on their investment accounts. However, you can take those losses at any point during the year. You can sell your securities that are at a loss to offset capital gains and up to $3,000 of ordinary income each year. Proper planning with security purchases and sales can make for big savings during tax time.
Three – Retirement Plans
Retirement plan contributions through work are often forgotten or underutilized. Many employers offer some type of match for a retirement plan and that is free money to you! If you are not contributing enough to take full advantage of the employer match, now is a great time to up your contribution. Also, if you are over 50, you can increase the deferral to the max contribution of $24,000. If you were a late starter on making those retirement contributions, you may even want to consider contributing to an IRA in addition to the 401k.
Four – Higher Education
Paying for college seems to be getting more and more difficult. By claiming some of the higher education credits that are available, you can lessen the financial burden. For some higher earners, the credits do have phaseouts. Get a head start on reviewing which credit could apply so you can make sure you don’t miss out.
Five – Estate Plan
Everyone has an estate plan; either the one you create or the one a judge determines for you. Now is the time to make sure you have your financial affairs in order and to maximize gifting strategies among spouses, family members and charitable organizations. Current estate and gift tax exemptions for 2017 are $5.49 million per taxpayer or $10.98 million per couple.
These are just five simple moves to make at this point to help reduce taxes and make sure you take advantage of a range of financial incentives. Don’t wait though, soon it will be too late, so schedule a 3Q tax review now.