Last Minute Tax Items

The last week of the year is generally packed with last minute items to minimize taxes owed.  Here's what we are doing:
  • Paying property taxes due next year.   The IRS typically doesn't allow deductions of prepayment of taxes owed in future years.  However, in our state, taxes are paid a year in arrears, meaning that we pay taxes for 2016 in 2017.   Our 2017 taxes are billed in 2018.   So it is OK for us to pay the 2018 tax bill before the end of 2017 and deduct the payment on our 2017 tax return.  
  • Charitable contributions.   We're making last minute charitable contributions that will include contributions that we were planning to make next year.  Unlike taxes, charitable contributions, even those pledged for future years, are deductible in the year paid.
  • Minimize capital gains.   If needed, we will sell some stocks with losses to offset any gains we may have this year.   We probably won't do this since I already took this step earlier in the year.
  • Medical expense.   The tax law lowers the medical expense deduction to the amount exceeding 7.5% of AGI for 2017 and 2018.   The limit goes back to 10% in 2019.   Since we have already exceeded 7.5% of AGI in 2017, any additional  medical expenses will be deductible.
  • IRA contribution.  Although we have until the April 16, 2016, I like to make our IRA contributions earlier, so that I don't forget.
  • Last estimated tax payment.   If I needed to pay estimate taxes, I would make my last state payment, which is due in January 2018, in 2017 so that I could deduct it this year.
 I will need to complete most of these by this Friday, since that is the last business day of 2017.

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This is not financial or tax  advice. Please consult a professional advisor.

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