There are a lot of ways, actually.
To oversimplify a bit, you want to avoid income that raises your tax liability while spending, donating or taking deductions that lower that liability, tax preparers told us.
So proceed with caution. And understand that smart financial decisions — whether you are a business or a private individual — depend on more than taxes, said Cari Weston, director of taxation for the American Institute of Certified Public Accountants, an organization that represents the accounting profession.
“Never make a decision based on taxes alone,” Weston said.
If you have trouble paying your mortgage, this is probably not the time to donate $50,000 to your church, she said.
Another piece of advice: Understand that nothing is the same for any two taxpayers. Don’t make drastic decisions just because you think a similar decision worked for someone else, Weston said.
“I have seen clients over the years make really bad choices, because their neighbor did it or their co-worker,” Weston said.
She recalls a client who dropped $75,000 on an SUV to take advantage of a federal business “SUV deduction.” This client paid cash for what he thought would be a write-off — three days after a law prohibiting those deductions above $25,000 took effect.
Said Weston, “That honestly happened, and I see similar things so many times.”
The key is to defer taxable income as much as you can while accelerating tax-deductible expenses where you safely can. (You'll find Internal Revenue Service tips on charitable giving at www.irs.gov.)
Another warning from Weston: "GoFundMe" account donations, while often generous and admirable, are not tax-deductible.
Joel Veldt, a certified public accountant with Dayton’s Ladd & Carter Tax Service, emphasized that navigating tax laws often takes the help of a good CPA, especially if you expect your income to go up this year compared to last.
For example, if you’re in line for a year-end bonus from an employer, consider delaying that if you can, Veldt said.
“You might find out, well, could they pay that bonus in the first week of January instead of the end of the December, so it’s taxed next year,” Veldt said.
Pay tax-deductible expenses before the end of December, if possible. Make tax-deductible donations now. Pay that spring tuition bill for your child in college now, if you can, Veldt suggested.
Accelerate state and local estimated tax payments that are due in January, he also said. Pay those in December, if you can.
The same holds for property taxes that are due next year — those might be moved up, too, he said.
Last year, Congress made permanent the ability to donate tax-free from one’s 401 (k) or IRA account, if a required minimum distribution from those accounts is looming, Veldt said.
If you’re willing to make the donation, that means up to $100,000 can be withdrawn from such retirement accounts and donated to a charity, instead of withdrawing it and exposing it to tax liability, he said.
In general, call your CPA before the end of the month, he emphasized.
They should be expecting a call.
“This is the time of year we meet with clients to do year-end tax projections and figure out what’s the most efficient way to minimize taxes,” said William Duncan, a CPA with Dayton’s Thorn Lewis and Duncan.
Charitable mainstay Goodwill emphasizes charitable deductions where possible. Melissa Fowler, a spokeswoman at Goodwill Easter Seals Miami Valley based in Dayton, said Goodwill will take items of clothing, furniture, computers and more.
Even that unwanted car, truck, boat or RV — even if it doesn’t run — can be taken, within certain limits, she said. (Goodwill Auto Auction reserves the right to decline an offered item.)
The few things Goodwill doesn’t accept include TVs, chemicals, paint or mattresses, Fowler said.
The IRS allows deductions based on the “fair market value” of the good being donated, according to Goodwill. So get a receipt or signed acknowledgement from the charity.
Tax tips
• Defer taxable bonus income, if you can
• Make smart donations to IRS-qualified organizations.
• Pay estimated deductible state, local and property taxes where possible.
• You may be able to deduct tuition expenses.
• Talk to your CPA.
Sources: Dayton-area CPAs, the IRS.
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