The end of the year is quickly approaching and once again, the proposed tax law changes are in flux. It’s time to do some tax planning to reduce the amount of taxes you pay on your 2017 income. How do you plan if the future of the current tax situation is uncertain?
Individuals could potentially see changes to their tax rates and breaks. We could also see the elimination of certain taxes such as the Alternative Minimum Tax and the Estate Tax. With the exception of the mortgage interest deduction cap in the House bill that would be retroactive for 2017, all the new income tax provisions would not take effect until 2018. As always, you should plan to postpone income and increase deductions by year end whenever possible.
As always, your best bet is to focus on tax planning under the current rules. Here are some strategies to help you minimize your 2017 tax bill.
If you have extra cash, maximize your retirement savings plan contributions before year-end. Your contributions will be tax deductible and you’ll be building that nest egg!
If you have appreciated stocks and a donative intent, now is a good time to transfer them directly to your favorite charity. You will get a deduction for the full amount of the contribution and won’t have to recognize the capital gains.
If you are experiencing lower income this year than normal, a good strategy is to convert your IRA to a Roth IRA. You’ll pay the tax now, but if you are in a lower bracket than you may be in the future, it’s a good time to make that move.
Contact your broker before year end and discuss your unrealized gains and losses. It may be a good time to sell a stock that will never recover to offset some of your realized gains this year.
Making contributions to a Section 529 plan to save for college expenses can also offer current tax savings. If you file married filing jointly and file a NYS return, you are eligible for a $10,000 deduction on your NYS tax return.
If you are over the age of 70 ½, be sure to take your required distributions by 12/31 or you could be hit with a hefty penalty. You can also elect oi take the distribution in the year following the year you turn 70 ½. However, this will lead to bunching of income and could create a greater liability.
Get started on these strategies today before you are too busy with the holiday rush to tax plan. As always, if you have any questions, speak to your tax advisor.
Kelly Saposnick is a principal based out of our Albany, NY office.