I had the wonderful opportunity to attend an educational conference in Tucson this past weekend, and it poured heavy rains and the weather was cooler.
Because we are right in the thick of summer, it’s tempting to just sit back and hit the cruise control for the next couple weeks or so until the kids get back in school, and do nothing different, make no changes, plan no plans.
It’s normal, however, one thing that I urge you to NOT avert your eyes from (however tempted you might be at times) is the state of your finances for 2017.
The last couple weeks I’ve given you some “big picture” strategy for how to move forward on reaching financial independence, but I didn’t write a great deal about how our own particular specialty plays into this: taxes.
So, in that spirit, I’ve put together a few things that WOULD behoove you to look at, in terms of your Dearborn and Detroit family situation — not just with your finances, but also your taxes — here, at around the midpoint of 2017.
A Basic Mid-Year Tax Planning Method for Dearborn and Detroit Taxpayers
“The secret of change is to focus all of your energy not on fighting the old, but on building the new.” -Dan Millman
The tax return preparation process is always an “historical” look at what happened during the year … whereas DURING the year, there are always things we can do to “write” history, so to speak.
What I will advise you on now is “quick and dirty” tax planning for wage earners. There’s usually much more that can be done, even if you don’t have complicated investments or Dearborn and Detroit business ownership. That’s worth a conversation (so call or email our office!). But here’s a good place to start…
To begin, all you have to do is take your cash flow for the first half of the year, and multiply by two. Add up your wages, dividends, interest, and any other income, and then — if this represents approximately what you’re expecting for the second half of the year — double the sum.
Once you have your estimated 2017 income, give us a call (or send me an email), and we’ll help you determine the appropriate tax rate and deductions to apply. Because once you’re armed with this info, we can help you determine the amount of taxes you might expect to owe for the 2017 tax year.
By then comparing this against your projected withholding, you can adjust the withholding on your paycheck in advance as needed, and ensure a happy outcome when your taxes are prepared.
This can also be a good time to organize your financial records or get started with some financial software. (YNAB, PowerWallet, etc.) Getting organized now can make gathering a report of all those deductions a breeze, come tax time.
And another thing: wealthier Americans, in particular, are facing higher tax rates on ordinary and investment income.
That makes it all the more important to review Uncle Sam’s highest-impact tax breaks, such as donations of appreciated assets, tax-free exchanges and capital-loss harvesting.
Unlike obvious moves, such as contributing to an individual retirement account or a 401(k) plan, these strategies require a higher degree of awareness and active planning.
But not all high-impact breaks are for the “wealthy”. Any homeowner can benefit from a provision allowing taxpayers to pocket tax-free income from renting a residence for as long as two weeks, and low-bracket taxpayers can pay zero tax on long-term capital gains.
Other important moves can help minimize estate, gift and inheritance taxes. Really, there are a variety of moves we can make to help you with your planning for the year … but you have to let us help you. It is, after all, why we are here.
And it starts with the snapshot of where you are right now.
So, shoot me an email, give us a call … we are right here.
I’m grateful for your trust, and for your referrals. And don’t forget what’s below as something you can share with your friends.
Alderwish CPA, PLLC