3 Ways To Increase Your Tax Breaks Before The End Of The Year
Posted on: 18 November 2017
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If you already know that you are going to be facing a tax bill for 2017, there are a few things you can do at the end of this year to reduce your tax bill for next year.
#1 Prolong Your Bonus
If you know that you have a year-end bonus coming your way, talk to your company and see if they can delay paying you your bonus until next year. This will add your bonus to your income in 2018 instead of 2017. Delaying the payout of your bonus will help you keep down your tax bill for the 2017 tax year.
#2 Take Capital Gains Next Year
If you have capital gains that you are due to get at the end of this year, see if you can defer those as well. Deferring your capital gains you are due to get at the end of 2017 onto 2018 will help you decrease your taxable income further for 2017.
#3 Get Rid Of Bad Investments
If you have any bad investments, such as mutual funds or stocks, that you lost money on, you may want to dump those investments. When you sell stocks and mutual funds for a lose, you are able to off-set the money that you made. This can allow you to essential wipe-out the gains that you made in your investments this year or reduce your overall taxable income for the year. If you have more than the allowable stock losses, keep in mind that you can carry over any excess loses into 2018.
#4 Increase Those Retirement Contributions
Finally, it is always a smart idea to increase your retirement contributions. You are able to put away a certain amount of money tax-free into your 401(K) each year as well as an IRA. If you have extra cash in savings, increase your contribution to either your 401(K) or your IRA. You have until the end of the tax season in 2018 to contribute to your IRA for 2017. This is a great way to invest in yourself and your future while lowering your tax bill.
Remember, if you defer income into 2018, make sure that you have your tax withdraw set up correctly so for 2018 you will not find yourself in the same situation facing a tax bill. If you withdraw the right amount from your monthly income, you shouldn't end up owning anything at the end of the year. You need to act fast and contact a certified public accountant if you want to reduce your tax bill for 2017.