10 End-of-Year Tax Tips for a Stress-Free Holiday Season
Between the holiday shopping and New Year's Eve parties, use these final days of 2017 to check a few tax-filing to-dos off your list. When it comes time to file your taxes, you'll thank yourself for remembering these few end-of-year tips to lighten your load (and your tax bill).
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Gather your receipts. It's time to get organized. Once tax season hits, you'll want to ensure that you have all of your receipts for deductible expenses in one place, so you don't miss any of your deductions.
Pay it forward. If the holidays encourage you to get in the charitable spirit, don't forget to save receipts when you donate non-cash goods or money. If it's a specific organization you're thinking about funding, check whether it's a not-for-profit 501(c)(3) recognized by the Internal Revenue Service. If so, you can also give a little bit back to yourself with a tax deduction. To confirm whether the organization you care about qualifies, visit the IRS website on exempt organizations.
[See: 10 Smart Ways to Spend Your Tax Refund.]
Deduct travel expenses when volunteering. Although you can't deduct the time you spend volunteering, you can deduct the expenses you incur while driving or a standard mileage rate of 14 cents per mile. Other travel expenses such as parking, air, bus or train fare, meals and lodging may qualify. Keep a log of the miles you travel for volunteer work and keep receipts for all the other travel expenses you incur.
Don't miss the child and dependent care tax credit. Just because the kids get a break for the holidays doesn't mean parents do, but luckily your taxes can. If you're working during the holidays and need to hire a babysitter, or even send your kids to camp, you may be eligible for the child and dependent care tax credit -- up to $1,050 for your child and up to $2,100 for two or more. The average cost of full-time daycare is almost $1,000 a month, according to BabyCenter.com. That's all the more reason to get that extra cash at tax time to put toward next year's holiday season.
Expecting a holiday bonus? Defer it to 2018. If the payout on your bonus is significant, it may bump you into the next tax bracket and increase your tax liability. If you don't need the extra income to pay for gifts under the tree, you may consider holding off until next year. You'll still receive the cash close to year-end, but you won't have to pay taxes on it when you file for 2017.
Maximize your retirement. By making contributions to your 401(k) or traditional individual retirement account, you can receive benefits now while saving for the good life in the future since contributing to your retirement reduces your taxable income. Additionally, self-employed individuals who contribute to simplified employee pension IRAs can deduct up to 25 percent of compensation, or $54,000 for 2017.
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Conserve energy and your tax bill with alternative energy equipment. The federal government encourages Americans to save the environment with little-known tax incentives. Installing alternative energy equipment such as solar panels and solar water heaters in your home can qualify you for a tax credit equal to 30 percent of your total cost. If you're looking to make an upgrade, don't hold off. The credit is only available through 2021.
Increase your marketplace premium tax credit. If you received assistance for marketplace insurance in the form of an advanced premium tax credit, lower your adjusted gross income by contributing to your retirement plan. This may increase the premium tax credit you're eligible for when you file your 2017 taxes.
Get a jump-bstart on next quarter's tuition. Paying for next quarter's tuition by Dec. 31 may give you a valuable tax credit, up to $2,000, with the lifetime learning credit. This can be claimed for any postsecondary classes you take and is not limited to degree requirements. This means any one-off courses you take to advance your professional development may help reduce your taxes dollar-for-dollar.
Self-employed? Maximize your write-off of your home office. If you are self-employed, you can deduct portions of your home from your tax bill. Expenses that may be deducted include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, painting, repairs and depreciation based on the percentage of the home or apartment that is used for business.
Lisa Greene-Lewis is a certified public accountant and TurboTax tax expert. She has more than 15 years of experience in tax preparation, including positions as a public auditor, controller and operations manager.
