You may feel you have no control over your taxes. You just owe what you owe, right? “Nothing is certain except death and taxes?” But no one said when or how!
Even just smart timing of your transactions can help you, especially if you are one of the millions of Americans who itemize deductions.
With the uncertainty of possible tax reform, even as lawmakers continue to debate rates and rules, now might be the best time to take advantage of possible deductions. Based on what we’ve seen so far, many taxpayers will lose the option of itemizing deductions on their tax return. Use those deductions while you still can! Here are three ways to do that:
1. Make your January mortgage payment early. Most mortgage payments are due on the 1st of each month. A sizable chunk of that payment is made up of interest, which is deductible. You deduct it on your Schedule A in the year the payment was made. If you pay on January 1st, it would be considered 2018 interest which may not help on your 2018 taxes. But if you make the payment in December, it is considered 2017 interest and can be included on your tax return come April.
2. Make charitable contributions by Dec. 31st. Clean out your closets, clean out the kid’s toy bin (make room for new stuff), send a monetary donation to your favorite cause, or donate food to your local food bank or shelter. All of these things can increase your itemized deductions and lower what you owe in taxes.
3. Pay your next property tax installment now. This may be the most difficult but also the most impactful of my suggestions. That’s because this is usually a large payment. But if you have the cash reserves to do this now it can greatly affect your taxes.
Deductions for mortgage interest, charitable contributions, and property taxes will not be available for most taxpayers if the tax plan is passed looking like what we’ve seen so far. In most cases it will be in your best interest to use the deductions now.
Keep in mind every taxpayer is different and we advise you to speak with a tax professional to see how and if these would help your situation. But do it fast! You have to do these things THIS YEAR for them to count!
Need a tax pro who knows what to do? Contact KMS Tax Prep ASAP to get insight into your situation.