The year is quickly drawing to a close. But there’s still time to take steps to reduce your 2017 tax liability, as long as you act by December 31st. Here are a few tried-and-true year-end tax planning tips for those who normally itemize their deductions:
- Pay your 2017 property tax bill that’s due in early 2018.
- Make your January mortgage payment to increase your mortgage interest deduction.
- Pay deductible medical expenses, but only if your deductible medical expenses for the year already exceed the 10% of adjusted gross income floor.
- Donate to your favorite charities.
These deductions could be particularly beneficial if tax reform is signed into law this year. New legislation may, beginning in 2018, limit or eliminate certain deductions such as property tax, mortgage interest, and medical expense deductions. However, the new legislation may also increase the standard deduction. This change would result in fewer taxpayers itemizing their deduction for these expenses. By increasing these deductions in 2017, you may benefit from the greater deduction in 2017 and a higher standard deduction in 2018.
Other potential tax savings ideas
Whether you itemize your deductions or not, there are a few items that you should consider to reduce your 2017 tax liability.
- Pay tuition for academic periods that will begin in January, February or March of 2018 (if it will make you eligible for a tax credit on your 2017 return).
- Sell investments at a loss to offset capital gains you’ve recognized earlier this year.
Keep in mind that in certain situations these strategies might not make sense. For example, if you’ll be subject to the alternative minimum tax this year or be in a higher tax bracket next year, taking some of these steps could have undesirable results. And know that with tax reform legislation, some taxpayers may find themselves in higher brackets next year.
If you’re unsure whether these steps are right for you, consult us before taking action.