It’s already fall and before you know it, another year wil be upon us. It’s never too early to plan ahead to minimze your tax bill. An experienced and knowledgeable tax professional can help any individual or business make the right year-end savings moves with important advice and assistance. Here is the second part of a two-part series on some things to ponder when considering potential tax moves between now and the end of 2016:
- Accelerate deductions
Finding ways to accelerate deductions into the current tax year is also a good strategy. For taxpayers itemizing deductions, making payments for deductible expenses such as medical costs, state taxes, and qualifying interest before the end of 2016, rather than paying them in early 2017, may provide savings on a 2016 tax bill.
- Take any required distributions
Once a taxpayer reaches age 70½, they must generally start taking required minimum distributions (RMDs) from traditional IRAs and employer-sponsored retirement plans, with exception. The penalty for any failure to take such distributions is 50% of any amount that failed to be distributed as required. The required date for taking distributions is the end of the year for most IRAs.
- Maximize retirement savings
Deductible contributions to a traditional IRA and pretax contributions to a 401(k) or other employer-sponsored retirement plan may reduce taxable income for 2016. Thus, it may be wise to consider making contributions up to the maximum amount allowed by the end of the year.
- Consider the alternative minimum tax (AMT)
Taxpayers subject to the alternative minimum tax (AMT), may not reap any benefits of traditional year-end tax-savings moves such as deferring income and accelerating deductions. In fact, making these tax maneuvers may have negative effects. The AMT essentially disallows a number of itemized deductions. Thus, making moves such as prepaying 2017 state and local taxes may hurt a taxpayer in 2017. It is crucial to determine whether the AMT applies before making any year-end tax-savings moves.
- Enlist the assistance of a tax professional
An experienced and knowledgeable tax professional may help any individual or business assess their current tax situation as it stands in the present looking ahead to the future. A considerable amount of information must be analyzed to accurately make this determination to maximize any tax planning. A tax professional may evaluate anyone’s situation to help determine the wisdom of any year-end tax-savings moves.
If you are an individual or business in the New York or Tri-State area and have any question about taxes, especially in planning ahead for the next filing season, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
