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Tax moves you may want to consider before the end of 2017

Published: Wednesday, December 27, 2017 @ 11:50 AM

You probably already know that big changes in the tax code are going to take effect starting January 1, 2018.

What you may not know is that there are still a number of things you can do over the few couple of days to potentially leverage those changes to your own benefit. And there are other actions you can take over the coming year to take even greater advantage of the new tax payer rules.

Tax moves to consider making before 2017 is over — and some you might want to make in 2018

Alongside other changes, starting tax year 2018, the standard deduction for individuals almost doubles to $12,000 which is up from $6350 in 2017. Married couples will see their standard deduction rise from $12,700 in 2017 to $24,000 in 2018.

This means that even if you itemize in 2017, you may not be able to do so in 2018 unless your deductions exceed these higher thresholds. This isn’t necessarily bad because you’ll be able to take advantage of a larger standard deduction but it still makes sense to look at this further.

RELATED: This new Trump tax calculator shows how much you’ll pay going forward

Let’s take an example to really understand what’s going on:

Let’s say you file as an individual and your current itemized deductions are $7000. Further, let’s assume that you project your itemized deductions will remain at about the same level for the foreseeable future.

That being the case, it makes sense to crowd as many deductions as you can into 2017.

That’s because in 2018 (in this example) and thereafter, your standard deduction ($12,000) will be higher than your actual expenses ($7,000) so you probably won’t itemize after 2017.

You get a greater standard deduction but you won’t be able to take advantage of the expenses you would otherwise itemize unless you find a way to pull them into 2017. Here are a some ways to do that:

State and local taxes, sales tax and property tax

Starting in 2018, the most you’ll be able to deduct for state and local income tax, sales tax and property tax is $10,000.

 The new tax law doesn’t allow you to prepay 2018 state and local income taxes and deduct those expenses on your 2017 return. But you may be able to prepay your 2018 property tax early if your local tax collector allows it.

 And if the $10,000 cap impacts you, this is something to look into. Check with your local tax property tax collection office to find out how to get this done over the next few days.

Also, if you make quarterly estimated payments, you can make your fourth-quarter payment by December 31st rather than January 16th 2018 and deduct those payments in 2017. Talk to your CPA about this if they haven’t already reached out.

Bunch your charitable contributions

The only way you’ll be able to claim a deduction for charitable contributions is if you itemize your deductions. And since the threshold will be higher starting in 2018, it may be more difficult to do.

One smart tactic might be to make greater contributions to charities before December 31, 2017.

Going forward, you might want to bunch up your contributions in years where your total itemized deductions are greater than the standard deduction or simply make a greater charitable contribution every couple of years so you have a shot of meeting the threshold and writing them off.

Call your tax preparer this week

The new tax law does away with a number of deductions and credits but you might be able to still claim them in 2017 depending on your situation.

Ask your tax professional about prepaying unreimbursed job-related expenses and even tax preparation expenses. This is especially critical if you are an employee because deductions for job related spending and tax prep go away after December 31, 2017.

RELATED: Saving for education? The new tax bill changes a few things

Take advantage of lower tax brackets

One of the benefits of the new tax law is that rates are reduced for many tax payers.

If it looks like you are going to be in that situation, pull out all the stops to push as much income as you can into 2018.

This goes for bonuses, commissions and any other income you have the ability to recognize after December 31, 2017. One word of caution: Before doing this, examine your unique situation carefully. Study the old and new tax brackets.

If you’re going to have a banner year in 2018 and expect to land in a higher bracket, you might be better off by reversing this and shifting some of that income to 2017, if possible. Even though the rates are higher now than they will be next year, if you are going to earn significantly more money next year, it might work out better for you to declare some of that income in 2017.

Mortgage interest

If you are currently deducting interest expense on an existing mortgage you have, you’ll be able to continue deducting that cost because you’ll be grandfathered in. But if you take a loan after December 15, 2017 you’ll only be able to deduct the interest on the first $750,000 you borrow. The cap of $750,000 applies to loans on your first and second home – combined.

This means you might reconsider moving if that involves taking out a big mortgage.

Another possible fix would be to use assets to pay down your mortgage to the levels that you can use to write off interest for new loans. With the stock market at all time highs, that might be a good way to reduce your after-tax cost of a big mortgage and reduce your exposure to the market.

IRA conversion recharacterization

After December 31st, you won’t be able to recharacterize IRA conversions. That’s too bad but this probably isn’t something you’d consider doing this year anyway. Here’s why:

Normally, people are interested in having a “do-over” when it comes to their IRA conversion when the stock market takes a big hit after they convert. The logic is, if the value was higher when they converted compared to the current value, they would be paying taxes on money they really no longer have.

Having said that, 2017 was pretty good for stock market investors. The odds of you converting some time during the year and now towards the end of the year, the value being much lower are remote. So, it’s good to understand that recharacterizations aren’t going to be available going forward but it probably isn’t a big deal for you right now.

Pack your bags

I mentioned earlier that you will only be able to write off state, local and property taxes up to $10,000 per year. Again, you have to consider your own situation carefully, but this might make it worth your while to move to a state with lower income and/or property taxes.

Even if you don’t take this step, please know that some of your neighbors will. That could end up hurting property values in high tax states long-term. You might want to get ahead of that wave and get out while the getting is good.

Open up your side business

Hands down, there are a lot more goodies for business in this tax bill than there are for individual tax payers. This might be the perfect time to fire up a small business or side gig. Before doing so however, please make sure to seek out professional tax advice. The tax opportunities are potentially great but the tax changes are complex. Professional guidance can be worth its weight in gold.

The tax code is going to change dramatically in 2018. It’s important to understand what’s happening, make the new rules for you next year and take advantage of the old rules while you still can. The smartest thing to do is contact your tax professional, create a tax plan and execute it accordingly.

Understand that the rules could easily change again. The IRS code is not written in stone. That’s why it’s always important to stay well informed of the changes as they occur.

Neal Frankle is a Certified Financial Planner and Editor of WealthPilgrim.com

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Downtown Dayton office building/Table 33 home sells for $2.8M

Published: Tuesday, May 01, 2018 @ 2:08 PM

Dayton city garage maintenance worker Kevin Price points upward at the 130 W Second St./ 1st National Plaza in downtown Dayton in this 2001 photo. FILE
Dayton city garage maintenance worker Kevin Price points upward at the 130 W Second St./ 1st National Plaza in downtown Dayton in this 2001 photo. FILE

A downtown Dayton office building near the federal building sold for just over $2.8 million today, according to local property records.

Titan Loan Investment Fund L.P. is identified as both the buyer and the seller for the May 1 transaction at 130 W. Second St. in downtown Dayton, according to Montgomery County property records.

The transaction is a sale to an investor named Brian Lash, a new owner coming into the market for this building, said Katie Doup, a Columbus-area spokeswoman with  real estate firm CBRE. She said a fuller press release was being prepared now on Lash’s investment in Dayton and his plans. 

 MOREMaker of Gibson guitars declares bankruptcy

Doup also said a second announcement on the sale of another Dayton building may be forthcoming in the near future. 

The 22-story building at 130 W. Second was on sale with an asking price of $4.25 million, according to a LoopNet real estate listing. It offered a rentable building area of just over 326,000 square feet and was built in 1972.

Acadia, the Table 33 restaurant, IT firm DataYard and County Corp. are some of the building’s most notable tenants. 

Acadia moved to the building last year from Kettering. The company moved to 4,800-square-feet of offices in that building.

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6 tax mistakes procrastinators make and how to avoid them

Published: Thursday, April 05, 2018 @ 11:46 PM
Updated: Thursday, April 05, 2018 @ 11:46 PM

What Happens If You Don’t Pay Your Taxes

We get it. Doing your taxes is no fun, especially if you know you’re going to owe money. But as with any project on which you procrastinate, leaving everything to the last minute can lead to errors, both large and small, and some of those errors could cost you serious money.

If you’ve gone and done it, though, and are still looking at that pile of tax forms over there in the corner, we’ve compiled a list of six quick-and-dirty tips that could keep you from making some obvious, and not-so-obvious, mistakes when you finally sit down and tackle the task. They could also help you maximize your tax refund.

1. You Forgot to Sign It

You might wonder how anyone could forget to sign their tax form, but this simple process is one of the most common tax mistakes, according to the IRS. Just like forgetting to sign a check or a contract, it means your return isn’t valid. Usually, there isn’t a penalty or interest associated with this error (since you’ve already included a check or electronic payment if you owed), so the IRS will just send a notice asking for a valid signature, but it will delay the processing of your return. If you’re getting a refund, that too will be delayed.

So check, double-check — heck, triple-check — that you signed or completed the e-signature process before filing your return. Also, check out these last-minute filing tips from the IRS.

2. You Miscarried the 9

Math errors are also a very common mistake made by folks in a hurry. Fortunately for most people, the IRS corrects any miscalculations, so there’s no need for filing an amended return. But these mistakes can mean the difference between you thinking you’re getting a refund and the reality that you actually owe taxes, so be sure to check your calculations carefully.

One way to help you avoid math errors is to file electronically so the calculations are done for you. Bye-bye, No. 2 pencil! So long, calculator!

3. You Didn’t Account for All Your Income

Did you have a side hustle early last year? A freelance design gig for a friend’s business? If so, you’re going to need to account for it, regardless of whether you received a W-2 or 1099 from whomever paid you. That’s because, while there’s an IRS threshold for filing these documents by employers, there’s no similar threshold for claiming the income. Income is income is income. If you made money and don’t report it — and the IRS catches it — it’s going to cost you penalties and interest at best, and open you to a possible audit at worst.

4. You Forgot Deductions or Tax Credit

It’s easy to forget these things when you’re in a hurry, but they can end up saving you some serious money and are well worth the extra time to figure out if you qualify. So if you’re just claiming the standard deductions because you’re under the gun, you might want to take a deep breath and check out TurboTax’s list of 10 commonly overlooked tax deductions that can keep you from overpaying the tax man.

5. You Filed for an Extension but Didn’t Understand the Rules

Filing for an extension is a great idea if you’re down to the wire and don’t really understand your tax situation. But remember that an extension gives you an extra six months to file your paperwork, but not an extra six months to pay any taxes due. So, if you’re confused, tax pros recommend doing a quick calculation of your taxes, filing for your extension and making any required payment of taxes you think you owe. This will help you avoid penalties and interest once you get your final calculations together.

6. You Didn’t Bother to Request an Extension

You gave up. You shoved, slammed and jammed your return through and now it’s full of mistakes that are going to cost you money by way of penalties or because you’ve left money on the table. It’s a much better idea to file the extension, then get the help you need from a tax professional to ensure you’re not overpaying your taxes.

Whatever you do, make sure you file your taxes. Unpaid taxes can have serious consequences on your personal finances, including your credit scores if they go unpaid long enough.

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11 ways to reduce next year’s tax bill

Published: Thursday, April 05, 2018 @ 11:55 PM
Updated: Thursday, April 05, 2018 @ 11:55 PM

SAN FRANCISCO, CA - APRIL 14:  Liberty Tax Service tax preparer Ronn Seely works on tax returns on April 14, 2011 in San Francisco, California. (Photo by Justin Sullivan/Getty Images)
Justin Sullivan/Getty Images
SAN FRANCISCO, CA - APRIL 14: Liberty Tax Service tax preparer Ronn Seely works on tax returns on April 14, 2011 in San Francisco, California. (Photo by Justin Sullivan/Getty Images)(Justin Sullivan/Getty Images)

If you claimed the right number of dependents and standard deductions on your 2017 federal income tax return and you still ended up owing the IRS, you’re probably looking to avoid a repeat performance next year. Luckily, there are several ways to increase your chance for a refund (or at least reduce the amount you’ll owe) and you don’t have to be a tax whiz or accountant to take advantage.

Here are 11 ways you can pay less in federal taxes for your income return next year.

1. Contribute to a 401K or IRA

Contributing to a retirement fund is an important way to ensure financial independence in your golden years, but it can also convey short-term tax benefits. In most cases, the contributions you make to your 401K and IRA plans are tax-deductible and are not included in your taxable income at the end of the year. (Note: If you didn’t contribute to an IRA in 2017, you still have time. You have until April 17 to contribute up to the maximum amount and shave off a good chunk of your tax bill. Filed your taxes already? That’s OK. You can file an amended return to reflect the contribution.)

2. Buy a Home

There’s a distinct tax benefit to home ownership. The interest you pay on your mortgage is tax-deductible, and the interest is front-loaded. For the first several years, most of your mortgage payment goes toward interest, which will drastically reduce your adjusted gross income at tax time. Want an extra boost for your taxes next year? Consider paying January 2019’s mortgage payment in December to get a tax benefit before the end of the year.

3. Donate to Charity or Volunteer

You probably know charitable donations can be itemized and deducted from your income, so you’ll want to save receipts anytime you donate cash or items to charity. You can even deduct miles you travel for volunteering or other charity work.

“Miles you travel on behalf of a charity are deductible at 14 cents per mile for 2018,” said Gail Rosen, CPA.

4. Start a Home Business

Starting a home business can provide you with a new source of income and allow you to take deductions off any income the business generates.

These deductions include business costs you incur throughout the year, a portion of your mortgage and utilities if you use a home office and the cost of goods needed to keep your business running. You can even deduct startup costs.

“Any expenses that are incurred before the first sale are ‘start-up costs,’” Rosen said. “These costs cannot be deducted until the first sale. Then they are deducted over 15 years and you can deduct the first $5,000 in the first year.”

5. Search for a New Job

If you hunt for a new job in your field this year, you can write off some qualifying expenses as you search. There are exceptions, but potential write-offs include things like clothes or travel.

“If you looked for a new job in 2018, you should be aware of the income tax deduction that may be available with respect to job-search costs,” Rosen said. “Qualifying expenses are deductible even if they do not result in a new job being offered or accepted.”

6. Open a Flexible Spending Plan

Many employers offer flexible spending plans that let you contribute toward yearly medical expenses pre-tax. These contributions typically don’t count toward your taxable income.

7. Deduct Medical or Dental Expenses

Many medical and dental expenses are tax-deductible. According to Rosen, the cost of getting to and from medical treatment is deductible at 17 cents per mile, plus the cost of tolls and parking, and dependent expenses are also deductible.

“If you cover the medical cost of dependents, these can be deducted. Additionally, if you are covering the costs of an individual who would qualify as your dependent except that they have too much gross income — for example, an elderly parent — you may be able to deduct these costs as well,” said Rosen.

8. Education-Related Expenses

Current and former students have many eligible deductions and credits related to their education expenses. Paid student loan interest and tuition and fees can be claimed as deductions. Eligible current students can also access the American Opportunity Credit, which can cover up to $2,500 annually for four years, and the Lifetime Learning Credit, which can cover up to $2,000 per tax return.

9. Install Solar Energy

Homeowners who install solar energy systems in their home can get back tax credits at up to 30% of the cost of installation. This credit will begin to decrease after 2019 so you may want to act soon if you’re planning on installing solar panels.

As an added bonus, solar energy can significantly reduce your energy bills.

10. Hunt Down Every Available Tax Credit

We’ve named several tax credits above, but there are more, including credits for adopting children, the cost of child care and low-income households. Tax credits are more valuable than deductions, as they reduce your taxable income on a dollar-for-dollar basis, so make sure you’re taking advantage of every option.

11. Get a Pro to Do Your Taxes

No matter how much research you do, a professional may be able to identify tax deductions and credits that hadn’t occurred to you. Paying a reputable professional you trust can help you stay organized and minimize your tax liability. Here’s a handy guide to finding the right tax professional for your needs.

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5 surefire ways to retire earlier than you thought

Published: Monday, October 23, 2017 @ 11:27 AM

The following are five surefire ways to get to retirement quicker Set clear goals for yourself and track your progress Working hard and being disciplined is the most reliable ways to retire early Streamline your spending and scale back on luxuries Cut your housing expenses Put your money to work - wisely

Retirement can seem like a difficult goal to reach, so the thought of achieving it early may seem downright impossible.

But getting to retirement quicker doesn't require genius-level investing knowledge or extreme deprivation. With a plan, hard work and discipline, you may be able to get there sooner rather than later.

RELATED: House hunters, here are 5 secrets to getting the best home loans

The following are five surefire ways to get to retirement quicker:

Set clear goals for yourself

Consumer adviser Clark Howard recently shared advice from Chris Reining, who decided in his late 20s that he wanted to retire early. By the time he turned 37, he was able to reach this goal.

Howard said he thought setting clear goals was one of the most important things that Reining did. He labeled his investment account "Retire early" so he could see the words every day. In addition, Reining tracked his progress by using a spreadsheet you can get on his website. He wanted to save up 25 times his annual expenses before retiring.

(Getty Images/iStockphoto)

Work hard

The Forbes Finance Council recommends working hard and being disciplined as the most reliable ways to retire early.

This can be achieved through a high-paying job combined with saving as much of your income as possible. Another path is starting your own business.

Reduce spending

Forbes quotes a blogger who retired early and says that streamlining your spending is an important step toward achieving this goal. It's not glamorous or complicated, but it works.

He suggests scaling back on luxuries and investing your savings in a low-cost index fund. When you accumulate 25 to 30 times your annual spending in this type of account, you can quit working for the rest of your life.

This Wednesday, Sept. 6, 2017, photo shows a new home for sale in a housing development in Raeford, N.C. On Thursday, Sept. 21, 2017, Freddie Mac reports on the week’s average U.S. mortgage rates.

Cut your housing expenses

If you're like most people, your home is your biggest expense, so it's also your biggest opportunity to save, according to Money.

Housing costs take up about a third of the average budget, so Money recommends not taking out the biggest mortgage you can get. Live in a more modest-sized home when possible, and in some cases, homeowners can purchase a two-family home, living in one side and renting out the other.

Put your money to work - wisely

CNBC talked to Scott Alan Turner, who had more than $70,000 in debt at age 25, yet managed to turn things around and retire by age 44.

He put his money to work and although he made some mistakes in the beginning, he evolved into what he calls a boring investor. His savings are automatically funneled into low-cost index funds, which Warren Buffet calls a surefire way to build wealth.

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