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It's Not Too Late: 5 Ways to Cut Your 2016 Tax Bill

Tax Day is almost here. Though Tuesday, April 18 is just around the corner, there are still some things you can do to lower your 2016 tax burden. Options include contributing to your SEP-IRA, contributing to a health savings account, and deducting state and local sales tax, in certain instances.
Benjamin Sullivan
PUBLISHED: Thursday, March 16, 2017

Contributions to your SEP-IRA and Health Savings Account are great ways to lower your tax burden.

Dentists: You can still reduce your 2016 tax burden, even with Tax Day almost upon us. Here’s what you need to do.
 
1. Contribute to your SEP-IRA by October 16. A SEP-IRA enables self-employed dentists to defer up to $53,000, or 20 percent of your net earnings. Great news: There’s still time to make a contribution to your SEP-IRA to lower your 2016 tax liability. You can fund your SEP-IRA up until your income tax filing deadline. That includes extensions. This gives anyone who files Schedule C until October 16, 2017 to drastically reduce their 2016 tax bills.
 
2. Contribute to your Health Savings Account by April 18.  HSA Contributions lower taxable income, dollar-for-dollar. Account owners must have a high-deductible health plan with a maximum allowable out-of-pocket amount of $6,550 for an individual and $13,100 for a family to be eligible. HSAs have the added advantage of lowering taxable income. Distributions can be used for qualified medical expenses tax-free.
 
The annual contribution limit for 2016 is $3,350 for individuals and $6,750 for families. Participants age 55 or older can also make $1,000 of additional catch-up contributions. There are no income limits. 
 
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3. Deduct state and local sales tax if it’s greater than the income tax. If you itemize deductions, you can choose to deduct either state and local income taxes or state and local sales taxes you paid in 2016. Take whichever results in the largest deduction. Sales taxes paid on your home or on building materials can also be included.

Click to the next page to read tips 4 and 5.


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