Serving the Entire Wilmington Area

1213 Culbreth Drive, Suite 402 Wilmington, NC 28405

CALL US TODAY FOR YOUR ACCOUNTING, PAYROLL, AND TAX SERVICES

"We don't just provide services, we deliver value!"

Leave us a Review

Quality Bookkeeping Services, Inc BBB Business Review

We are seeing Clients by appointment only. If you are in a need of an in person meeting, please contact us to schedule. 

We offer phone consultations in addition to in person meetings.


Blog Post

Are You a High Earner? 6 Ways to Reduce Your Income Tax Bill in 2017 and Beyond

  • By Admin
  • 06 Jul, 2017
Most, if not all, taxpayers want to reduce their income tax obligations. Keep reading for some tips on how to reduce your 2017 income tax bill.

Are You a High Earner? 6 Ways to Reduce Your Income Tax Bill in 2017 and Beyond

Most, if not all, taxpayers want to reduce their income tax obligations. But when you're a high-income earner who pays a larger percentage of your income in state and federal taxes, it's even more important to proactively work to lower your tax burden throughout the year.

What steps can you take during the summer, fall, and winter to make 2017 taxes less taxing? Here are 6 ideas for different high earners.

Look at the Future

Tax planning for high earners should not be looked at from a one-year perspective. Rather, take a more long term approach by considering what your potential future earnings and investments will look like in 2018 and beyond.

Are you on an upward earnings trajectory? Then you may want to hold back some deductions--such as donations, buying a home, or going to school--for next year. On the other hand, if you're planning to go back to school in the near future, it might be better to use more deductions or make larger tax-deductible contributions now and use education credits later.

Max Out Contributions

One of the easiest ways to reduce your tax bill is to ensure that you're contributing the maximum amount to all tax-advantaged accounts. In 2017, each working spouse can generally contribute up to $5,500 ($6,500 if you're over 50) to a traditional IRA. This is in addition to up to $18,000 allowable contribution to your company's 401(k) plan. Discuss income limitations with your accountant or tax preparer.

As well as maximizing your deductible (or even non-deductible) retirement contributions, you may also be able to contribute tax-free to a Health Savings Account if you have a high deductible health plan through work.

Know Your Investments

The current tax system offers a lower tax rate on long-term passive investments like stocks and bonds. So, when working with your investment advisor, discuss how to maximize your holdings of investment assets for longer than one year rather than selling them under this threshold. You may also want to harvest losses on underperforming investments before December 31.

Another thing to pay attention to is tax-advantaged investment options. Municipal bonds, for example, are exempt from federal taxes and often from state or local taxes, as well.

Give Money Away

There are several benefits to being generous with your money in 2017. Within certain guidelines, for example, charitable contributions to qualified organizations are usually deductible from your taxable income.

In addition, think about what would happen if you or your spouse passed away during 2017. Would your estate run the risk of being subject to the estate tax? Currently, the threshold for the estate tax is $5,490,000. You can reduce this tax risk now by giving to your potential heirs while still alive. If you keep individual gifts under the gift tax threshold of $14,000 per spouse annually, you can do so tax-free to either party.

Use a Backdoor Roth

If you have a Roth IRA but are no longer eligible to contribute to it due to income limitations, you can still convert contributions from a traditional non-deductible IRA to your Roth IRA. While this may not save money in 2017, it will save money when you withdraw those funds upon retirement.

Be aware, though, that backdoor Roth conversions are somewhat complicated, so you should work with your accountant or tax professional to do this.

Hire Your Kids

If you're a sole proprietor, you can help reduce both your tax bill and your children's. How? Hire them as employees to work in your small business. Hiring your own minor children (under regular employee rules) means that their wages are not subject to FICA payroll taxes, but you can still claim the wages as a deductible business expense.

In addition, you could contribute up to the standard $5,500 of their earnings into an IRA...meaning it would tax-free for them. They could use this money without penalty for things like college tuition and even buying their first home.

While it may not be much fun to spend time planning for your taxes, doing so can result in hundreds or even thousands of dollars in savings when filing season comes around. And that's money you can spend having fun instead.
By admin 19 Dec, 2023
Ensuring a steady cash flow is not just about survival but also about unlocking your business's immense potential. Read about our strategies for management.
By admin 11 Oct, 2023
Ensuring a steady cash flow is not just about survival but also about unlocking your business's immense potential. Read about our strategies for management.
By 10 Aug, 2023
Has your business gone through a big change recently? Learn about three situations that may require you to redefine your business tax commitments.
By Admin 10 Jul, 2023
While petty cash may be a minor part of your operation, it's an important tool to have around. Read this blog to learn how to manage it effectively.
By Admin 03 May, 2023
As a small-business owner, you know that every penny counts. Read this blog to learn how you can maximize your small company’s tax deductions.
By Admin 23 Dec, 2022
Generally accepted accounting principles (GAAP) can increase your creditworthiness. See these ten principles if your company wants to use this standard.
By Admin 12 Oct, 2022
Operating a small business comes with many responsibilities, including payroll taxes. Learn the basics of taking care of this important duty.
By Admin 03 Aug, 2022
Do you spend a lot on accounting? If your annual accounting spending is higher than the average, discover the following accounting mistakes to avoid.
By Admin 08 Jun, 2022
A good payment system for your employees can be a huge boost for your business. Read this blog for three steps towards improving your payroll process.
By Admin 21 Apr, 2022
Forensic accounting deals with the identification, analysis, and presentation of financial evidence. Read this blog to learn what kinds of cases they serve.
Show More
Share by: