7 Tax Tips You Need to Read
The end of the year is near, and now is the time to consider the tax moves that could make your 2017 brighter. Here are 7 tax tips you should consider:
1. Defer your income. If you are self-employed, you can defer your billing so you don’t get paid until the following year. This is especially worthwhile if you think you will be in a lower tax bracket next year.
2. Give gains to charity. If you itemize, making a charitable contribution could lower your taxes. Rather than giving cash, consider giving your most highly appreciated security. You will usually get a deduction equal to the full value of the security and not have to pay a capital gains tax later.
3. Max out the 401(k). If you are 50 or older, you can generally contribute up to $24,000 annually to this company retirement account. And, contributing will lower your taxes. Never miss out on an employer match.
4. Consider a Roth conversion. You can take a portion of your pretax traditional IRA and convert it to a post-tax Roth IRA. This is something you should consider if your marginal tax rate now is low and likely to go up in the future, such as when you take Social Security or start the required minimum distributions after age 70½.
5. Take advantage of a possible state pension tax exemption. Many states allow you to take limited amounts from your 401(k) or IRA without paying any state taxes. You will still have to pay federal income taxes.
6. Sell your losers. Have some investments that haven’t panned out? Consider selling and taking the tax loss. You can generally use the loss to offset gains, or take up to $3,000 loss per year ($1,500 if married filing separately), and apply it against your ordinary income.
7. Sell your winners. Sure, this is the opposite of the previous move, but if you are in the 15 percent marginal tax bracket, your long-term capital gains are taxed at zero percent. When it comes to taxes, zero is my hero.
There is nothing simple about taxes. Though these 7 tax tips could save you a bundle, be very careful. Your individual circumstances will dictate which of these strategies might work for you.