Get a Head Start on 2018 with 6 Year-End Tax Planning Tips

Between trimming the tree, wrapping presents and baking cookies for Santa, it’s hard to believe that another New Year is fast approaching — and with it another tax season.

But just a few smart moves during the waning days of 2017 can put you ahead of the tax preparation game for 2018. Here are 6 tax saving strategies you’ll want to add to your to-do list before December 31.

#1: Minimize Your Capital Gains Tax

In a strategy known as loss harvesting, you can lower your capital gains exposure and reduce taxable income by selling investments that have declined in value.

Keep in mind that you may not repurchase the same investment, or one “substantially identical” to it, for 30 days after the sale.

#2: Give Wisely

When you get into the spirit of giving this holiday season, look for ways to benefit those you care about while minimizing your tax liability.

• Tax-deductible contributions. Many people already know that donating to a nonprofit organization reduces your taxable income. But before you hand over that wad of cash or write that personal check, remember that there are other ways to give. You may be able to avoid capital gains taxes by donating appreciated stock or property to a favorite charity.
• Tax-free gifts. Thinking of giving cash to your children or other loved ones? You can give up to $14,000 to an individual without them having to pay a gift tax. For a gift with long-term benefits, you may also make a tax-free contribution to a 529 college savings plan for your child, grandchild or other young person in your family.

#3: Accelerate Year-End Expenses

When you pay for things matters. Making tax advantaged expenditures now can help reduce your taxable income for the upcoming filing season.

• Pay for things early. If possible, pay your property tax bill, along with any tax deductible business expenses, before the end of the year.
• Leverage medical expenses. Do you have unreimbursed medical expenses that exceed 10% of your adjusted gross income (AGI)? If you’re under 65 you may be able to deduct them if you pay by December 31. If you’re 65 or older the threshold is 7.5% of your AGI. End-of-year medical purchases are a great way to use up leftover flexible spending dollars. You also have until December 31 to contribute pre-tax dollars to a health savings account.
• Make an extra mortgage payment. If you plan to deduct mortgage interest, making your January payment early gives you 13 months worth of interest to deduct.

#4: Defer New Income

Deferring new income until January can reduce your tax bill for 2017.

• If you get a year-end bonus at work, ask if your employer can pay in January instead of December.
• If you’re self employed, bill clients in January instead of December if possible.
• For profitable investments, consider waiting until 2018 to take capital gains.
• Review any net trust income, and determine whether you can defer distribution elections to next year.

#5: Take Required Distributions

If you have a traditional IRA, you must begin taking required minimum distributions (RMDs) by April 1 the year after you turn 70 ½.

Subsequent withdrawals must be made by December 31 each following year to avoid penalties. Failure to take RMDs will trigger a 50% excise tax on the minimum amount you should have withdrawn.

#6: Contribute to Your Retirement Savings

Tax advantaged retirement savings programs let you build your nest egg for the future while lowering your taxable income today.

• If you have a 401(k) plan through your employer, you have until December 31 to contribute up to $18,000 if you’re under 50 or $24,000 if you’re 50 or older.
• If you have a traditional IRA, you have until April 17, 2018 to put in a maximum of $5,500 if you’re under 50 or $6,500 if you’re 50 or older.

Are you looking for tax-efficient strategies?

Get in touch with us at The Resource Center. We’ll answer your questions and help you develop a sound, tax-efficient financial strategy for building your assets.

We are not permitted to offer, and no statement contained herein shall constitute, tax or legal advice. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation. We are able to provide you with information but not guidance or advice related to federal benefits. Our firm is not affiliated with the U.S. government or any governmental agency. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and The Resource Center are not affiliated companies. AW12175556