There’s a solid chance you meet with a tax professional just once time per year: tax season. To get your money’s worth from the time you spend with your accountant this year, use these tax savings tips for high income earners.
Tax Savings Tips for High Income Earners: Ask your Accountant the Right Questions
1. Have I used every available deduction?
Your accountant will most likely provide you with a questionnaire to get a better understanding of your finances for the year, but it may not cover everything on your Form 1040.
One of the most important tax savings tips for high income earners is to ask them if you’ve taken advantage of all of the deductions you qualify for, including:
- Investment Interest Expense Deduction. If you’ve borrowed money to purchase taxable investments (such as property), you may be able to deduct investment-related expenses.
- Unreimbursed Employee Expense Deduction. Job-related expenses you incurred during the year, for which you were not paid back by your employer, may be deductible.
- Medical and Dental Expense Deduction. Expenses over 10 percent of your adjusted gross income, 7.5 percent if you are 65 or older, that you paid for medical and dental care for yourself, spouse and dependents are deductible.
- Casualty and Theft Loss Deduction. Uncompensated casualty and theft losses to your home, household items and vehicles during the tax year may be deductible.
2. What should I do with my IRA?
Individual retirement accounts (IRAs) are popular due to their potential tax benefits.
Ask your accountant the following about IRAs:
- How much should I contribute to my SEP IRA (if applicable)?
- Should I switch from a traditional IRA to a Roth IRA (or vice versa)?
Depending on your income, the answers you receive may differ.
3. How can I lower my tax bill in the future?
The key to a lower tax bill is to reduce your taxable income as much as possible. Common ways to do so include contributing to an employer-sponsored retirement plan like a 401(k) or donating to charity, but your accountant will have more ideas based on your unique financial situation.
4. Are gifts to my family members tax deductible?
Gifts of up to $14,000 given in 2017 are not taxed, and therefore are not deductible. Anything over the $14,000 limit, however, is deductible. So, if you give someone $15,000, the extra $1,000 is subject to the gift tax, which must be reported on your tax return.
Starting in 2018, the limit is $15,000 per gift.
5. When should I start taking my Required Minimum Distributions?
Required Minimum Distributions (RMDs) are the minimum amounts retired individuals must withdraw from certain retirement accounts when they reach the age of 70 ½. However, it may be beneficial to do so a little bit earlier, depending on the other aspects of your finances.
When you meet with your accountant, use these tax savings tips for high income earners to get the most back on your 2017 tax refund. The information you learn can also be reported to your financial advisor for further planning.