7 Tax Moves You Need to Make Before Year's End to Save in 2017

7 Tax Moves You Need to Make Before Year's End to Save in 2017

by Greg Lindberg, November 2016

Another year is almost in the books!

There's no time to dwell on the hours you've lost with your hectic schedule. Instead, try these seven tax moves before the calendar turns to 2017 to help you save money when you file your income tax return in the spring.

1. Evaluate any life changes you've had this year.

People experience big changes in their lives on a fairly regular basis. While change isn't always easy, it can result in tax savings.

If you have gotten married, had a child, gone back to college, or bought your first home in 2016, you are likely to be eligible for some tax savings for which you may not have qualified in the past. That's because there are tax deductions and tax credits available for many of these scenarios. So, review your calendar year, and then determine if you qualify to take advantage of any of these tax savings in the spring.

2. Get your tax documents and financial records in order.

Spend some time organizing all of your tax documents and financial records. These may include previous years' returns, receipts for business expenses, invoices, mileage logs, pay stubs, and any other related paperwork.

You'll need certain documents to prove your eligibility for various tax breaks. It can also reduce time and stress in March or April not to be hurriedly digging through a huge stack of papers to find what you need.

3. Reduce your taxable income—legally.

To claim certain tax deductions and credits, you'll probably have to fall below specific income limitations. If you expect to come close to exceeding one of these income thresholds for a tax break, consider using legal methods to reduce your taxable income before December 31.

For example, you may anticipate receiving a December payment from one of the clients in your small business. If possible, delay this income by having the client lump this amount with a payment in January or February. Of course, always use legal ways to reduce your taxable income, since there are rules against delaying paychecks or holding onto checks before cashing them in order to avoid paying taxes on the income in a given year.

4. Looking for a new job? Now's the time to get one.

Most job search expenses you incur, such as traveling to an interview out of town or using a resume assistance service, are generally tax deductible.

Also, if you relocate to a city or state and your new employment is at least 50 miles further than the commute from your previous employer's location, the expenses you incur for this move are deductible. So, try to get your new job now so you can reduce your tax bill next year.

5. Contribute to your retirement accounts.

Putting money in a retirement plan is a simple way to reduce your taxable income. Before year's end, contribute to your 401(k), IRA, Roth IRA, or any other retirement plan you currently maintain. Or, open a new plan and contribute to it, if you have the funds handy.

6. See your doctor or dentist.

If you need to have your annual physical or a dental cleaning, now may be a good time to make your appointments. That's because you may qualify to write off medical costs for 2016.

In order to deduct medical expenses, remember that the IRS says they have to represent more than 10% of your adjusted gross income—or more than 7.5% for those 65 and older.

7. Make charitable contributions for the holidays.

With both the holidays and calendar year-end approaching, charities are actively looking for contributions. Go through your closets and donate some items you no longer need to qualified charitable organizations. Items in usable condition that include clothing, electronics, toys, and vehicles are a few examples of what you can typically donate and write off on your return. Cash donations are also welcomed.

Don't forget to get a receipt—or written acknowledgement with the fair market value—for the donation from each charity so that you can prove any deductions you take for charitable contributions made. You also must itemize on Schedule A.

With a bit of thoughtful planning between here and year-end, you can take actions that will benefit you—and your tax bill—greatly in the new year.

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