Are you staring at a big income tax bill for 2016 because you had a great year, or are you looking at a refund because this year was lousy? Depending on the year you had, here are some savvy ways to get the most out of your taxes — provided you take action at the right time.
- If you anticipate that your 2017 will not be as good as your 2016, add as many deductions to this year's bill as you can by December 31, 2016.
- If you anticipate 2017 will be better than 2016, push your deductions into the New Year.
Are you staring at a big income tax bill for 2016 because you had a great year, or are you looking at a refund because this year was lousy?
Depending on the year you had, here are some savvy ways to get the most out of your taxes — provided you take action at the right time.
Year-end is an excellent time for taking some simple steps to reduce your taxable income.
If your income was strong this year and you can use every possible deduction, take these steps by December 31. If you had a less-than-stellar year, your goal is to push as many expenses as possible to January 1, 2017.
(Caveat: Always check with your tax professional to determine the best course of action in your specific case.)
In each of the scenarios below, if you anticipate that your 2017 will not be as good as your 2016, take the steps to complete these items by December 31, 2016.
If you anticipate 2017 will be better than 2016, push your deductions into the New Year.
1. Property taxes
In some states, you pay your property taxes in a single installment, while others bill you twice a year.
For example, if your property taxes are not due until February 1 of next year, or if your first installment falls in December and the second installment is due next year, paying them in 2016 can increase your deduction for this item by as much as 50 to 100 percent.
2. Time for a new car?
Over the holidays, there are plenty of year-end deals that can make purchasing a new car a great idea.
Before you decide whether you should lease a new car or purchase, check with your accountant to determine which scenario will give you the best tax break.
If you decide to purchase, MileIQ explains how you can take up to $11,160 ($3,160 plus $8,000 in bonus depreciation) the first year you own the vehicle, provided you haven’t taken the standard mileage deduction on your current car in the same year. This assumes 100 percent business use for your vehicle.
If you use your car for personal purposes, this number is reduced by your percentage of personal use.
To qualify for bonus depreciation, you must purchase a new vehicle and use it for business more than 50 percent of the time.
If you’re keeping your present car, then have your car detailed, prepay your insurance, and if it needs work or new tires, handle it now.
If you are considering upgrading to a new mobile device, this is a great time to do it — not only for the tax benefits, but because you also have time to learn the new system before the year starts in earnest.
Moreover, if your primary computer or tablet is more than three years old, upgrading will give you a big jump in both speed and memory. The same is true for your phone.
4. Pre-pay the entire year
If you have anything that is on a monthly subscription that you know you will use throughout next year, it’s usually cheaper to pay for a full year rather than having to pay monthly.
Moreover, if you pay in full now, you can deduct the entire amount against your income for this year.
5. Load up on home office supplies
If you have a legitimate home office and have ample storage space, head off to your local discount warehouse for cleaning products, coffee, notebooks, paper supplies, pens, stamps and so on.
This can also include open house supplies such as candy, soft drinks, water or any other non-perishable items that you may need.
6. Time to order new signs or business cards?
Your signs, riders, and business cards are an important part of your “store front.”
If your signs and riders are looking a little worse for wear, or if you will need new cards in 2017, make your replacement order now.
7. Pay your January bills now
Even though your mortgage and other bills are not due until later in the month, pay them early to take the additional deduction.
8. Make a charitable donation
Do you own a clunker that could be donated to your favorite charitable cause? What about those clothes, books and other items you are no longer using?
Donate them for an additional tax write-off. To determine the value of these items, visit the Salvation Army site.
9. Purchase your favorite client gifts or marketing items
Do you like giving your clients a gift card from your favorite restaurant, home improvement store or some other type of item? If so, remember you can legally deduct $25 for a single client or $50 per couple.
If you want to minimize your 2016 tax bill, take action now — the clock is ticking.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles and two best-selling real estate books. Learn about her training programs at www.RealEstateCoach.com/