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Year End Tax Strategies, Pt. 1: The Basics

(posted: November 20th, 2017)

If tax time brings you stress, (and if it doesn't, we'd like to know your secret) we think these tips and tricks in this series of posts may help. There are things you can do before the end of the year to help minimize the pain of April 15.

Whether you do your own taxes or rely on a tax professional, these strategies may be able to help you keep more of your income and boost your after-tax returns. Though you can't take it with you, it's nice to maximize what you've got while you're here!

This is Part 1 in our Year End Tax Strategies series.

The Basics: 6 Simple Steps

Use last year’s tax return as a starting point, and begin by updating some of the key items:

  • Salary and other income
  • Deductions you'll be making
  • Dependents you plan to claim

You can use tax preparation software to see where you stand, or ask your accountant for an estimate. If the initial estimate seems high, don't panic.

  1. Double-check your withholding. You want to pay the IRS what you owe, but not a penny more. Make sure you're not having too much (or too little) taken out of each paycheck. If you make quarterly estimated tax payments the same advice holds - Double-check those witholdings too.
  2. Consolidate debt. Consider replacing credit card debt, which generally has a higher interest rate, with a lower-rate, tax-deductible home equity loan or line of credit (HELOC).
  3. Account for refinancings. If you lowered your mortgage interest rate in the past year, you may now have a lower interest deduction. Also, if you used any of the proceeds for something other than physical improvements to your home, that amount may be subject to the alternative minimum tax (AMT). Remember that points paid in prior refinancings that you haven't already deducted can be deducted the year you refinance again.
  4. Prepay quarterly estimated state tax payments. Consider paying your fourth-quarter 2015 estimated state income taxes and any outstanding balance by December 31. Your payments will be tax deductible for the 2015 tax year if you're not subject to the AMT.
  5. Prepay property taxes. Many counties bill taxpayers twice, in November and February. If you pay your February installment by December 31, you can take it as a deduction on your 2015 return. Again, watch out for the AMT, which disallows these deductions.
  6. Avoid the AMT if you can. More taxpayers are facing the AMT, particularly dual-income homeowners who have children and live in high-tax states. If you're one of these taxpayers, try to defer payment of state and local taxes and accelerate income to the point where you're no longer subject to the AMT.

These are just the basics. Get started with these steps, and then come on back for more tips. We'll be posting a total of four blogs in the Year End Tax Strategies series. Check back, we'll add links when the other posts go live.

  • Year End Tax Strategies, Pt. 1: The Basics
  • Year End Tax Strategies, Pt. 2: Portfolio Checkup
  • Year End Tax Strategies, Pt. 3: Retirement Planning
  • Year End Tax Strategies, Pt. 4: Education & Charity

As always, if you need help or wonder if any of these strategies is right for you, please Contact Us!


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