Year-End Planning

Beth Vittitow, CPA, CGMA, PFS, CFP®
Manager, Kassouf Wealth Advisors, LLC

With the end of 2017 quickly approaching, now is the time to consider year-end strategies which may be available to you and your family. Review the following to help you navigate your financial options for 2017 and prepare for the upcoming year.

  • Review your investment portfolio and determine if any investments can be disposed of to harvest unrealized capital losses, which could offset realized capital gains and dividend income.
  • Consider deferring your year-end bonus, the sale of capital gain property, and receipt of distributions to defer income into next year.
  • Maximize contributions to employer-sponsored retirement plans. The maximum contribution is $18,000 for individuals under age 50. If you are 50 or older, you could take advantage of an extra $6,000 deferred. If you don’t utilize the Roth deferral option, these contributions lower your current-year taxable income. The earnings grow tax-deferred until withdrawn from the plan.
  • Maximize retirement savings by making contributions to Traditional/Roth IRAs. The maximum contribution is the lesser of your taxable compensation for 2017 or $5,500. Those that are age 50 or older can take advantage of the extra $1,000, which can be contributed.
  • Withdraw your Required Minimum Distribution (RMD) if you are past age 70 ½ before December 3, 2017.
  • Evaluate the optimal time to begin taking Social Security benefits; you can apply for benefits between ages 62-70.
  • Utilize funds available in your Flexible Spending Account.
  • Consider funding a Health Savings Account (HSA), if appropriate. Contributions are tax-deductible and grow tax-deferred. Unlike a Flexible Spending Account (FSA), funds are not forfeited if not used by year end.
  • Consider gifting up to $14,000 per individual ($28,000 for married couples) as a method of wealth transfer without gift taxes.
  • Contribute to charities using appreciated stock in lieu of cash to reduce capital gains in your portfolio while generating an income tax deduction.
  • Consider giving cash to a charitable foundation such as the National Christian Foundation (NCF) or Greater Birmingham Foundation (GBF) to obtain immediate tax deductions.
  • Consider funding 529 Plans for children and/or grandchildren. Some states offer tax deductions or credits against tax for these contributions.
  • Consider accelerating year-end state income tax payments, real estate tax payments, and charitable contributions into the current year to take advantage of the maximum deduction for that particular year. (Access the potential impact of the Alternative Minimum Tax on accelerating deductions.)
  • If you are over age 70 ½ and would like to make a donation to a charity from your IRA, you can donate up to $100,000 and exclude the donation from taxable income.
  • Review the Medicare Prescription Drug Coverage (Part D) plan, and make any changes during open enrollment, which begins in October.
  • Review beneficiary designations and update as necessary.
  • Review and adjust withholding and estimated tax payments to avoid underpayment penalties.
  • Business owners with excess cash profits should evaluate equipment purchases, retirement plan designs, and acceleration of tax deductions into the current year.
  • Pay bonuses due to staff/employees before December 31, 2017.
  • Seek any additional tax credits available based on specific factors including income, education, home ownership, and dependents.

It is important to remember that tax planning never follows a “one-size-fits-all” approach. Clients should consult with their tax advisors to evaluate if they are making decisions which reflect and support their long-term wealth management goals.

 

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