Year End Tax Planning For Individuals

​Many strategies to reduce your 2017 tax liability will expire on 12/31/17. It is crucial to review your tax situation prior to the end of the year and implement any potential tax savings measures while you still have the ability to do so. Below are a few of the most common individual planning opportunities.

• If you expect to be in the same or lower tax bracket next year consider accelerating deductions into 2017 and/or deferring receipt of taxable income. If you expect to be in a higher tax bracket you may benefit from doing the reverse.
• Increase your charitable donations prior to year-end. Any donations made before 12/31/17 will be deductible on your 2017 return. (This is especially true IF the charitable donation deduction is eliminated for 2018.)
• Related to charitable donations, if you are planning on making a substantial gift you may want to donate appreciated stock.  The benefit is two-fold; you will get a deduction for the full market value of the stock AND you don’t have to pay capital gains tax on any unrealized gain. 
• Consider contributing to retirement accounts. 401(k) accounts are eligible for employee deferrals of up to $18,000 (plus a bonus $6,000 catch-up contribution if you are over 50) and must be deferred from your paycheck before 12/31/17. (IRA contributions can be made up until 04/15/18.)
• If you are eligible for an HSA account consider contributing to it as well.
• Harvest portfolio gains and/or losses. If you have gains in your portfolio, are eligible for the 0% capital gains rate, and expect to be subject to the higher capital gains rates in the future, you may want to sell now. Then repurchase the securities you want to keep and increase your cost basis to the new purchase price. If you have securities that are worth less than you paid for them and you are ready to reinvest the money elsewhere you may want to go ahead and sell.  “Harvesting” the capital loss before year end will allow you to offset the loss against any taxable capital gains in your portfolio. If you do harvest losses make sure that you are aware of the “wash sale” rules and wait at least 30 days if you are going to repurchase a substantially identical security.  (The wash sale rule does not apply to harvesting gains.)
• Use your Flex Plan at work. It is a “use it or lose it” account. You must use it by 12/31/17 unless your plan allows for the optional two and a half month carryover or $500 carryover provisions.
• Low to moderate income earners can take advantage of the expanded Saver’s Credit.
• Consider converting a Traditional IRA to a ROTH IRA. You will pay tax in the year of conversion but all future growth will be tax free.

We have also recently posted a Year End Business Tax Planning article if you are either self-employed or a small business owner. 

This is general information and a brief summarization of complicated tax issues which are often subject to many exclusions and limitations. We make every effort to verify the accuracy of all information but we do not guarantee or warranty advice disseminated over the internet. Please give us a call to discuss potential strategies and ensure they make sense for your specific situation.