Tax planners often develop checklists to guide taxpayers toward year-end strategies that might help reduce taxes. Typically, suggestions are grouped into several different categories, such as “Filing Status” or “Employee Matters,” for ease of reading. When year-end approaches, it might be wise to review each suggestion under the categories that may apply to you.

Business Income and Expenses

• Accelerate expenses (such as repair work and the purchase of supplies and equipment) in the current year to lower your tax bill.
• Increase your employer’s withholding of state and federal taxes to help you avoid exposure to estimated tax underpayment penalties.
• Pay last-quarter taxes before December 31 rather than waiting until January 15.
• Make sure that you meet the required threshold percentages of your AGI to deduct expenses by “bunching” miscellaneous expenses into the same year.
• If you have significant business losses this year, it may be possible for you to apply them to the prior year’s returns to receive a net operating loss carryback refund. If you had significant income in prior years, you should maximize the current year’s losses by deferring income if possible.
• In certain circumstances, it may be possible for the full cost of last-minute purchases of equipment to be deducted currently by taking advantage of Section 179 deductions.
• Generally, you are able to make a contribution to your retirement plan at any time up to the due date (plus extensions) for filing a given year’s tax return.

Personal Residence and Other Real Estate

• Make your early January mortgage payment (i.e., payment due no later than January 15 of next year) in December so that you can deduct the accrued interest for the current year that is paid in the current year.
• If you want to sell your principal residence, make sure you qualify to exclude all or part of the capital gain from the sale from federal income tax. If you meet the requirements, you can exclude up to $250,000 ($500,000 for married couples filing jointly). Generally, you can exclude the gain only if you used the home as your principal residence for at least two out of the five years preceding the sale. In addition, you can generally use this exemption only once every two years. However, even if you don’t meet these tests, you may still be able to qualify for a reduced exclusion if you meet the relevant conditions.
• Consider structuring the sale of investment property as an installment sale in order to defer gains to later years.
• Maximize the tax benefits you derive from your second home by modifying your personal use of the property in accordance with applicable tax guidelines.

Retirement Contributions

• Make the maximum deductible contribution to your IRA. Try to avoid premature IRA payouts to avoid the 10 percent early withdrawal penalty (unless you meet an exception). Contribute the full amount to a spousal IRA, if possible. If you meet all of the requirements, you may be able to deduct annual contributions of $5,500 to your traditional IRA and $5,500 to your spouse’s IRA. You may be able to contribute and deduct more if you’re at least age 50.
• Set up a retirement plan for yourself, if you are a self-employed taxpayer.
• Set up an IRA for each of your children who have earned income.
• Minimize the income tax on Social Security benefits by lowering your income below the applicable threshold.

Charitable Donations

• Make a charitable donation (cash or even old clothes) before the end of the year. Remember to keep all of your receipts from the recipient charity.
• Use appreciated stock rather than cash when contributing to charities. This may help you avoid income tax on the built-in gain in the stock, while at the same time maximizing your charitable deduction.
• Use a credit card to make contributions in order to ensure that they can be deducted in the current year.

Itemized Miscellaneous and Medical Expenses

• Take advantage of the adoption tax credit for any qualified adoption expenses you paid. In 2016, you may be able to claim up to $13,460 (up from $13,400 in 2015) per eligible child (including children with special needs) as a tax credit. The credit begins to phase out once your modified AGI exceeds $201,920 (up from $201,010 in 2015), and it’s completely eliminated when your modified AGI reaches $241,920 (up from $241,010 in 2015).
• Maximize the use of itemized miscellaneous expenses and/or medical expenses by bunching such expenses in the same year, to the extent possible, in order to meet the threshold percentage of your AGI.
• Make sure that you have applied for Social Security numbers for all new dependents. Otherwise, the dependency exemption on your income tax return may be disallowed.

^{Securities and advisory services offered through LPL Financial, a registered investment advisor, member FINRA/SIPC. The opinion voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Bush Wealth Management and LPL Financial are separate entities.}