FALL/WINTER 2017-2018 | BWD 9
1) Defer your income:
If you’re able to, request that your employer increase your retirement
plan contributions and/or submit your last paycheck or bonus into
your retirement plan. For 2017 you’re able to contribute up to $18,000
to a traditional 401(k) plan and other similar retirement plans, plus
an additional $6,000 if you are over the age of 50. You may also have
the option to submit contributions to your simple 401(k) or IRA plan
if you are a small business. This year’s annual limit is $12,500, plus an
additional $3,000 if you’re over the age of 50.
If you are a business owner, your company can receive tax deductions
for matching and other employer contributions. You may also have
the option to utilize a safe harbor 401(k) plan. A safe harbor 401(k)
plan is similar to a traditional 401(k) plan, but safe harbor plans help
business owners and highly compensated employees contribute the
maximum salary deferral amount of their annual income into a tax-
deferred 401(k) retirement plan.
The deadline to set up a new safe harbor 401(k) qualified retirement
plan is October 1 for 2017, but you can set up a non-safe harbor
account, though it will be subject to compliance testing for the
current year. Non-safe harbor plans can be converted to safe harbor
plans on January 31 of the following year, and safe harbor benefits
will apply to the plan the next calendar year – in the event all
employee notice deadlines are met. 3) Student loan interest:
For business owners, in addition to the annual participant
contribution limits and safe harbor employer contribution options,
also consider adding or revisiting how your plan’s profit sharing
contribution is calculated. All too often, this potentially valuable tax
and retirement planning resource is not updated with the evolving
needs and resources of many business owners. 4) Speak to your financial consultant:
2) Charitable giving:
Don’t overlook the charitable donations you made this year. You are
able to write off out-of-pocket costs you acquire while performing
good deeds. For example, if you donate clothing, or incur expenses
while volunteering, you can write these items off on your tax return.
Charities will advise if they have 501(c)(3) tax-exempt status, but
other organizations are not required by the IRS. They’re still counted
as charities, and include religious organizations or not-for-profit
volunteer companies. There are deduction limits, but for most people
the limits on charitable contributions don’t apply. Don’t forget to
request receipts, and always itemize your donations. This confirms
if your charitable deductions exceed the amount of standard
deductions you would receive for your filing status.
When you claim student loan interest as a deduction, you can
lower your income by $2,500. This is a great option for recent
graduates (if the income limits are met) whose parents paid the
debt on their behalf. A child who is not claimed as a dependent
can qualify for the $2,500 deduction in a given year.
You may think that you need to speak with your advisor in the
months leading up to tax season but it should be on your radar
throughout the year. Talking to your tax advisor can help you
minimize retirement taxes and help your savings last. They can
help you make assessments, hone your year-end and retirement
tax strategies and advise you of more personalized ways to
reduce your tax liability. Tax planning must be complete before
year-end, so you must be proactive and inquire about how you
can restructure your finances.
We can probably agree that our dollars spent on taxes would be
better spent on family or funding our financial goals. Utilizing
these tips may help reduce your tax liability and lessen the
potential headache come April.
ABOUT THE AUTHORS
Ryan Sullivan is a principal and managing director of Rehmann Financial. Ryan works extensively with individuals, families
and business owners to build financial plans to accomplish their goals. Contact him today at [email protected].
Joe Zaiter is a comprehensive wealth management advisor. Joe focuses on helping clients understand and achieve
their personal life goals. Contact him today at [email protected].