Year-End Financial Planning and Tax Moves for 2017

2017-year-end-financial-planningIt’s December, and the holiday season is upon us once more. It can be a busy time of the year, and the remaining days of 2017 can go by in a flash. There is a lot of uncertainty about tax changes for 2018, however there is still some tax planning you can do for 2017.

Here are some financial and tax moves you can make before the end of the year that can make a real difference.

Accelerate State Income Tax and Property Tax Payments

It’s looking like the tax overhaul that comes out of Congress will include a repeal of the itemized tax deduction for tax payments, including state & local income taxes, as well as property tax payments over $10,000. If you itemize deductions and you have a final quarter of state income tax payments that are due in January, consider paying it now so you can take the deduction in 2017. Similarly, if you have 2017 property taxes of over $10,000 due in April, consider paying them now.

Maximize Retirement Plan Contributions

If you contribute to a 401(k) plan, now is a good time to review how much you have contributed so far for the year. If you are not on track to contribute the maximum — $18,000 for people under 50 years old and $24,000 for people over 50 — consider increasing your salary deferral for the remainder of the year.

If you earn income from work or self-employment but do not have a 401(K) plan to contribute to, you may benefit from making a year-end contribution to another type of account such as an IRA. There are several varieties of IRAs, each with advantages that may suit your situation. Some types may provide a tax deduction for 2017 as well as tax-deferred growth for years to come.

Leverage Your Charitable Giving

If you make charitable gifts, consider giving appreciated securities rather than cash. Gifts made in this way get the full credit for the market value of the donated investment, and you get to avoid paying capital gains taxes on the investment gains.

If you are over age 70 1/2 and subject to IRA required minimum distributions, you can use your IRA to make charitable gifts via a Qualified Charitable Distribution (QCD). QCDs are not counted as taxable income, yet they go toward satisfying the required minimum distribution.

If you have an unusually high income year, you can create a large tax deduction by funding a Donor Advised Fund (DAF). A DAF can be used to make charitable gifts for many years, yet you get the tax deduction now for the amount you fund the account with.

Check Flexible Spending Accounts

If you have money left in a Flexible Spending Account (FSA), be sure and use it before year end. Money in a FSA not spent by year-end will be lost.

Consider a Roth IRA Conversion

If your taxable income is low, consider converting IRA money to a Roth IRA. The conversion is taxable income, but you can choose to limit the amount you convert to stay in a low income tax bracket. And best of all, after the year is over, you have until the tax return is filed to change your mind. You can reverse some or all of the Roth Conversion, giving you a rare opportunity to tailor the amount of taxable income you want to have for the tax year, after the year is over.

Financial and Tax Moves Can be Made Throughout the Year

While these last minute year-end financial planning moves can be beneficial, there are many more impactful financial moves you can make throughout the year. Some, such as cash flow, estate, risk management and charitable strategies, can have a big impact but require careful forethought and planning and so are best done without rushing to complete them at year-end. At Blankinship & Foster, we work with you to craft sensible, well-designed financial moves to assure you are effectively managing your family’s wealth.

About Jon Beyrer

Jon Beyrer, EA, CFP® is a partner of Blankinship & Foster LLC and is the firm’s Chief Compliance Officer. As a lead advisor, he focuses on helping families achieve their goals with sound wealth planning. In the community, Jon serves on several boards and is co-founder of the Professional Alliance for Children, a legal/financial charity for families of ill children. He has been quoted in The Wall Street Journal, The New York Times, and the Journal of Financial Planning. Jon lives in San Diego with his family.

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