November 14, 2017
November Greetings! Thanksgiving is coming soon so before you enter your food coma from the meal, this letter will offer a few options you may have to save on taxes, support a charity, or make a gift to someone you love (or even just like). These are all year-end deadline sensitive moves that must be completed before the clock strikes twelve on December 31st.
Tax reform is being feverishly discussed in Washington these days but many of the items below remain untouched in the first proposals and remain good opportunities to defer, avoid, or even reduce your taxes - today! This is a partial list but a good starting point.
Annual exclusion gifts – every adult is permitted to give any person, be it family, friend or foe, up to $14,000 per calendar year gift tax-free (but not deductible). For married couples, this is doubled to $28,000. Annual exclusion gifts are “use it or lose it” at year-end. Contributions to 529 education plans count too and some states, such as New York, give you a state income tax deduction as an incentive to save for college. Even if your children are already at school, you can contribute to the 529 plan, secure the deduction and use the money for tuition in the same year.
401(k) plans – If you are a participant in a 401(k) plan, December 31 is your contribution deadline. I often hear people say they wish their year-end bonuses didn’t have to be taxed - so here’s a way! If you haven’t yet made the maximum contribution, you can put some or all of your bonus into the 401(k) plan and defer more income tax. The trick is to set this up BEFORE the bonus is paid to you so now is the time to plan it out.
Property and state income taxes – Pay next year’s (2018) property tax bill this year and state tax estimates too. What? Pay taxes early? It is counterintuitive, but this particularly applies if you have more income in 2017 than you expect next year. It can be helpful to reduce your ‘17 taxes by accelerating your deductions. It will cost you next year but, in the meantime, beware the AMT, or alternative minimum tax. We recommend that you consult with your accountant to address your specifics. It could be worth paying and getting a deduction today that you may lose ‘tomorrow’.
Charitable Gifts – Use appreciated stocks and securities to fulfill your charitable gifting wishes. Most charities are equipped to receive shares of stock through their brokers. Using stock gets you maximum benefit because you avoid capital gains tax on the (now) unrealized gain. You still get the deduction for the full value of the gift, subject to certain limits. The non-profit organization doesn’t taxes, so they don’t mind either!
Contact us soon if you would like to discuss or need help with any of the above items. Have a Happy and filling Thanksgiving!
Scott Lasky, CFP
Nothing provided herein constitutes tax advice. Individuals should seek the advice of
their own tax advisor for specific information regarding tax consequences of
investments. Investments in securities entail risk and are not suitable for all
investors. This is not a recommendation nor an offer to sell (or solicitation of an offer
to buy) securities in the United States or in any other jurisdiction.