Here are a few end-of-year tax tips to consider. Please let us know if you have questions about your specific tax situation.

Purchasing Equipment

Never buy equipment with tax benefits as the primary consideration. Instead, consider the overall economics. An equipment purchase may or may not impact your taxes, but it will impact your overhead. Only buy equipment when you need it & it makes sense from a larger economic perspective.

Payroll

The items you need to run through payroll before the end of the year are: make your salary > $305,000 to maximize your profit-sharing plan; pay your kids < $12,950; pay your spouse if they are on your retirement plan ($22,500 for 401(k) or $16,500 for SIMPLE IRA).

ROTH IRA Conversions

If you are making ROTH IRA conversions, make sure they are done by the end of the year.

Loss Harvesting

Be careful when harvesting losses since being out of the market could cost you more than what you are saving in taxes. Check with your advisor to see if there are going to be capital gain distributions on your mutual fund holdings in taxable accounts for the year. These amounts come out in early December & are often the largest surprises rather than the actual long-term capital gains.

Bill Pay

You can prepay some of your bills for the next year, such as rent. Just remember that this will wind up giving you more taxable income for the next year if you don’t do the same process at the end of next year.