Look at the Big Picture
- Evaluate strategies for 2017 while considering implications for 2018.
- Tax planning can provide a preview of your tax situation and guide last-minute endeavors.
- You should strive to legally minimize income taxes and avoid surprises.
Impact of Tax Proposals
- We may see major tax legislation before the end of 2017.
- 2017 might be the last year that many taxpayers claim the standard deduction for the foreseeable future.
- In 2018 the standard deduction may be nearly twice its current amount.
- Deduction for mortgage interest may be curtailed.
- Deduction for state and local income taxes may be eradicated.
- Deduction for real estate taxes might be restricted.
- Deduction for medical expenses may be limited or abolished.
- Deduction for unreimbursed employee expenses might be eliminated.
- Moving expense deduction may be eliminated.
- Exclusion of gain from sale of a principal residence may be modified.
- Availability of like-kind exchanges may be reduced.
- Maximizing 2017 itemized deductions may be prudent because of impending legislation.
- Make final deductible payments (mail check or charge on a credit card by December 31).
- Consider non-cash charitable contributions.
- Maximize 401(k) or similar retirement plan contributions.
- Would it be beneficial to accelerate payments for real estate taxes, state/local income taxes and your January mortgage?
- Does it make sense to postpone income until 2018 if you have the ability to do so?
- Contribute to a 529 college savings plan?
- Are any funds left in a Section 125 flexible spending account?
- Consider the applicability of making gifts to the $14,000 annual gift tax exclusion per recipient.
Consider Changes in Life Status
- Did your marital status change during 2017?
- Were any children born this year? Did any children get married?
- Did you experience a death in the family?
- Was there a change in your employment status?
- Did you purchase or sell a primary residence or other property?
- Will you or a dependent begin or end college education soon?
Evaluate Gains and Losses
- Analyze non-qualified investments to determine if it makes sense to dispose any of them.
- You may be able to generate deductible losses while preserving much of your original portfolio by selling securities and repurchasing them at least 31 days later.
- Don’t forget about possible capital loss carryovers available from 2016.
- Remember that losses from flow-through businesses may be limited by basis, passive activity and other provisions.
Christopher Harper, CPA, MBA
Instructor of Accounting
Seidman College of Business