Tax Deductions Strategy for 2017
It's income tax time. What that means for businesses and individuals is we want to pay the least amount of tax by taking advantage of ALL the deductions and credits we qualify for.
If we are going pay the least amount of tax, we must have a good tax plan. Business owners get that, but individuals should take heed as well because there is potential to reduce the amount of tax we pay.
Business owners have the dream and vision of where they want their companies to go, but often lack the financial knowledge of how to get their company there. Most businesses fail because of the lack of proper accounting. Every business owner wants to reduce expenses but few understand the one area that guarantees to save money - income taxes. According to a General Accountability Office (GAO) study, taxpayers overpay their taxes every year by 1 BILLION dollars. That’s an average of $438 per taxpayer. How much of that change did you give to Uncle Sam last year?
The IRS does not advise individuals or businesses if they missed a tax deduction. That’s why you should seek out a tax professional that understands the impact of taxes and how to reduce them. Without further to do, let us go on to the first strategy.
Strategy #1: HSA Plan
One of the most under-utilized tax strategies is the Health Savings Account
(HSA). This account offers a variety of benefits, including:
– Tax Savings. Contributions are tax deductible and will lower tax liability.
– Tax-free Spending. Money in an HSA account can be spent for tax-free qualifying
health care expenses.
– Retirement Support. An HSA can help pay for your retirement. After we turn 65,
we have the option to withdraw money for non-health care expenses, and then pay federal
income taxes on it. As a HSA holder, we pay ordinary income taxes on nonmedical-related
withdrawals, yet with none of the mandatory disbursements required by traditional
IRAs.
These plans are still recognized under ObamaCare as a tax-favored savings account combined
with a qualifying high-deductible health insurance plan. It allows taxpayers to get a
tax deduction for their healthcare expenses on the front page of their tax returns, enables
the unused portions to grow tax free, offers tax-free distributions for healthcare expenses,
and, if not used for healthcare, it can be used like a typical IRA after the age of 59 and ½.
To reap the tax savings benefit of an HSA plan, the deadline
to have one in place is December 1. For example, to receive a deduction during 2017,
we have to have a high-deductible health insurance policy (“HDHP”) in place by December
1, 2017. However, you can contribute funds the HSA up until April 16, 2018. The IRS’s definition of an HDHP plan is $1,300 for individual plans and $2,600 for a family plan with additional out of pocket ceiling. Please contact us for further questions or to schedule a consultation – 208-935-1040.
