Posted on: 10 November 2017
If you are worried that you 2017 tax bill is going to be a little larger than you can handle, you can take steps right now to reduce your 2017 tax bill. You need to prioritize your 401(k) contributions, IRA contributions, and tax payments; here's how:
#1 Get Your 401(k) Contributions In
The first thing you need to do is get your 401(k) contributions in or your 403(b) or 457(b) contributions, depending on the type of retirement plan your workplace has set-up. With your 401(k), you need to make sure that you get your contributions in before the end of the calendar year. You can deduct up to $18,000 a year, which means you can subtract that number for your salary from your overall taxable income.
For example, if you make $50,00 a year, and you deduct $18,000, your taxable income will be $32,000. If you are a single individual, this will bring you down from the 25% tax bracket to the 15% tax bracket, saving you a significant amount of money. You will not only fall into a lower tax bracket, less of your income will be taxed as well.
It really pays to contribute to your 401(k), especially if you are on the line in-between different income brackets.
#2 Contribute To Your IRA
Second, set aside money to contribute to your IRA. Your IRA limit is significantly lower than the limit for your 401(k). Your limit for your IRA is $5,500 for 2017. Luckily, you can contribute to your IRA into the start of 2018. However, it is a smart idea to set aside the money for your IRA right now before the end of the year. That way, you are pulling your IRA contributions out of the money that you are making this year.
#3 Make Your Tax Payments
Finally, make sure that you pay your taxes on any property that you own. Any property taxes that you pay can be written off your overall tax bill. If you really need to reduce your tax bill for 2017, consider making your tax payments for 2018 in advance. That way, you can maximize the write off for your tax payments for 2017.
Contributing the maximum to your 401 (k) and IRA account can allow you to deduct up to $22,500 off of your taxable income. That can result in quite the tax savings and can help you to reduce your payments if you have a large tax bill coming up. Contact your local QuickBooks services for more information and assistance.Share