Take action to increase tax benefits.
If you are having a good year, recovering from recent losses or still struggling to take off, you can save a lot on your taxes by making the right moves by the end of the year.
The income is taxed in the year it is received, but why pay taxes today if you can pay tomorrow?
It is difficult for employees to postpone their wages and salaries, but it is possible to defer an end-of-year bonus until next year, as long as it is usual practice for your company to pay end-of-year bonuses the following year.
Of course, it only makes sense to postpone the rent if you think it will be in the same tax category or the lower category next year. You will not want to have a larger tax account applied the following year if the additional income could drive you to more fiscal support. If this is likely, you may want to accelerate your revenue in 2018 so that you can pay the lower support fees first rather than on the next support.
Just as you might want to postpone revenue next year, it is advisable to reduce your tax bill by speeding up your deductions this year.
For example, donating to charity is a great way to get a deduction, and you control the time.
But accelerated deductions can be a mistake if you are subject to the alternative minimum tax, as explained below.
Don't lose the valuable tax deductions if you can relate instead of claiming the standard deduction. According to the Internal Revenue Service, approximately 75% of taxpayers take the standard deduction, but may not have significant tax deductions if they can detail it.
• If the qualifying expenses exceed the standard deduction, which in 2018 is $ 12,000 if you are single, or $ 24,000 if you are married and have a joint statement, then you should probably maximize the deductions and itemize.
• Don't worry about figuring out if you can detail or take the standard deduction. TurboTax will solve it for you based on your answers to simple questions about your deductible expenses.
Whether you are on the detailed border or not, your year-end strategy should focus on the grouping. This is the practice of calculating expenses to produce lean and fat years. Within a year, accumulate the highest amount of deductible costs using the tactics described above. The aim is to beat the standard deduction amount and request a more substantial cancellation.
Sometimes accelerating tax deductions can cost money, if you are already in Alternative Minimum Tax (AMT) or if you activate it involuntarily. Originally designed to ensure that wealthy people cannot use legal deductions to reduce their tax, AMT now increasingly influences the middle class. The AMT is calculated separately from your regular tax debt and with different rules. You have to pay as much as your tax.
A key end-of-year strategy is called "leverage": sell investments like stocks and mutual funds to make losses. So you can use these losses to offset the taxable profits you've made during the year. Losses compensate for dollar-to-dollar gains.
There can be no better investment than deferred tax recovery accounts. They can reach a considerable value because, over time, they accumulate without taxes.
Company-sponsored 401 (k) plans can be the best offer because employers usually match the contributions.
Congress has created rules for "child taxation" to prevent families from changing the income tax bill from the category of high taxes of mothers and fathers to the fund.
• By 2018, child taxation imposes investment tax on a child over $ 2,100 at the same rates as funds and properties, which are generally higher than those of individuals.
• If the child is a student on a full-time base and provides less than half of his support, the fee applies typically until the year the child turns 24.
You should start making regular minimum distributions of your traditional IRA before April 1 after the year you turn 70. Not being able to eliminate enough causes is one of the most severe IRS sanctions:
• A special 50% tax on the amount you should withdraw based on age, life expectancy and the amount in the account at the beginning of the year.
• Subsequently, annual withdrawals must be made by 31 December to avoid the penalty.
When making withdrawals, it is advisable to ask your IRA custodian to withhold paying taxes. The withholding is voluntary, and the amount is set, but the retention option avoids the hassle of making quarterly estimated tax payments.
Flexible spending accounts, also called flexible plans, are additional benefits offered by many companies that allow employees to transfer part of their payment to a special account that can be used later to pay for child care or medical.
John Pournaras Agency