CHICAGO, December 14, 2017 – The clock is ticking down in December, but, there’s still time to make money-saving moves. The Illinois CPA Society shares these tips that may help lower your taxes and possibly boost your refund before the new year arrives.
- Contribute to Retirement Plans – 401(k), 403(b), SAR-SEP, and individual retirement account (IRA) plan contributions may be pre-tax deductions that can lower your taxable income.
- For 401(k)s – The maximum 401(k) contribution allowed for 2017 is $18,000 ($24,000 if you are age 50 or over).
- For IRAs – Taxpayers have until April 17, 2018 to make IRA contributions attributed to 2017. $5,500 is the maximum traditional IRA contribution allowed for 2017 tax filings ($6,500 if you are age 50 or over). Be aware that there are income levels and other qualifications which may limit the tax deductibility of IRA contributions.
- Advance Mortgage Payments – Homeowners who can afford to prepay their January mortgage payments in December may benefit from deducting additional mortgage interest on their 2017 returns. The same goes for those who can prepay the first installment of real estate taxes due in 2018.
- Make Charitable Donations – In addition to making tax-deductible contributions of cash or goods to qualifying organizations, you may also consider donating shares of stocks, mutual funds, and other securities that have appreciated in value during the year. With investment donations, taxpayers can avoid paying capital gains taxes on the appreciated amount of their investments and may also receive charitable contribution deductions for the full value of the securities donated.
Make sure the organizations you’d like to support can accept in-kind transfers of specific investments. It’s also wise not to wait until the end of December since investment contributions can take several days or longer to complete. And as always with charitable donations, make sure you get a receipt or proof that your contribution was received.
- Be Aware of the Alternative Minimum Tax (AMT) – If you are subject to the AMT, accelerating deductions for 2017 can actually cost you more in taxes. Since the AMT is calculated separately from regular taxes, and with different rules for deductions, taxpayers can actually end up inadvertently triggering the AMT and paying more.
Every taxpayer's situation is unique. If you’re unsure about whether you may be impacted by the AMT or have questions about investments, income deferral or other tax topics, a certified public accountant (CPA) can help you save money and create your own smart, year-round financial plan.
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