Seasonal Smart Tax Moves

Hi Folks, just a few ideas to cut your tax bill next year. Idea number # 2 is my personal favorite because you can reduce your tax bill while supporting a charitable initiative that improves the lives of others. Take a look at the list a do something before year end. Happy Holidays to you and yours .

Ho Ho Ho David.

4 Last-Minute Tax Strategies for Clients in High-Tax States

Some key deductions are going away next year, but there's still time for your clients to act

1
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Time is running out for advisor clients who are facing tax increases next year as a result of the tax bill that Congress has just passed. 

 

Although the bill cuts federal income taxes for many taxpayers, advisor clients who live in high-tax states such as California, New York and New Jersey could ultimately pay more in taxes or receive only a slight benefit because they will no longer be able to deduct more than a total of $10,000 in state and local income taxes and property taxes or take advantage of other disappearing deductions. That change is expected to put downward pressure on home prices in some of those markets. Many taxpayers may also choose to stop itemizing deductions and take a standard deduction, which is doubled under the tax legislation, instead.

 

"Tell clients to keep calm," says Megan Gorman, a founding partner of Chequers Financial Management in San Francisco. There are strategies to help minimize taxes for next year, but clients need to be aware that there is no one-size-fits-all solution and that one move designed to minimize taxes could unintentionally increase a taxpayer's tax liability. "People need to talk to their CPA," says Gorman.

 

(Related: The Tax Cuts and Jobs Act: An Advisor’s Guide)

 

Here are some year-end tax strategies that clients facing higher taxes next year should consider, courtesy of Gorman:

2
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Prepay local property taxes. Under the final version of the tax bill, taxpayers cannnot prepay state and local income taxes but they can prepay local property taxes. If those taxes alone will exceed $10,000 or in combination with state and local income taxes will top $10,000 next year, advisor clients should consider paying some or all of those property taxes before year-end. 

 

First, however, they need to check that they won't be subject to the Alternative Minimum Tax next year — which is why they need to call their accountant — because those prepayments are considered a preference item for purposes of the AMT. They also need to consider whether they can afford to make the prepayment. "Never let a tax deduction drive you to cash-poor," advises Gorman.

 

Taxpayers should check with their local tax authority to see if there is a limit on how much of their property taxes they can prepay.

3
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2. Maximize charitable donations. There are many reasons clients may want to increase donations to charities this year. Since marginal tax rates are higher this year then next, the tax deduction for charitable donations for those who continue to itemize will be worth less next year.

 

Those clients who don't expect to itemize next year because of the new tax regime can front-load their donations this year to maximize their charitable donation deduction. They can also donate appreciated securities to swell contributions and deductions this year since they likely don't have a lot of losses to offset gains in their stock holdings given this year's strong rally and gains in the previous eight years.

 

Gorman suggests that clients consider setting up a donor-advised charitable account this year for donations if they don't already have one.

4
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3. Prepay a charitable gift that will disappear. Under current law, taxpayers can deduct 80% of the price they pay for the right to purchase tickets for college sports events. The payment is considered a charitable donation to a school's athletic department. That deduction goes away next year as a result of the new tax legislation, so clients who are die-hard fans of a college sports team should check with the school about prepaying for the 2018 season.

5
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4. Defer income into next year. Since marginal tax rates will be declining next year, clients who can defer income into 2018 should do so. Some, especially corporate executives, may already be enrolled in a tax-deferred compensation plan, but others may be able to take advantage of that basic strategy if it's available to them.

 

Instead of rushing into making any of these adjustments, clients can also just pause and see what happens next, says Gorman. "Creativity will occur along with new rules and new opportunities, and tax planners will think of new ways to work with the new code."

 

5 Inspirational Authors to Enjoy This Summer

If you’re craving an inspirational read that will bring joy to your life, consider these 5 books—all written by amazing women.

Is Now the Time to Buy or Refinance?

With interest rates at historic lows, review these pros and cons to decide whether it’s a good time to buy a home or refinance.

Should You Save for Retirement or for a Child’s College Education?

Learn how to balance saving for your retirement and saving for your children’s education.

Tips for Teaching Your Children About Money

Learn best practices for educating your children on how to spend and save money responsibly.

Scam Alert! Protecting Yourself and Your Finances

Learn how staying abreast of the latest scams can help you keep your money and personal information safe.

Answering Your Biggest Questions on the SECURE Act

Learn the details of this groundbreaking retirement legislation.

Prioritizing Your Financial Health in the New Year

Find tips you can incorporate into your plans for the year to help you set a steady course for financial success.

Charitable Gifting Strategies for the Season of Giving

Learn about different charitable giving strategies and how to determine which is the best fit for you.

Tips for Avoiding Common Holiday Cyberscams

Learn about common holiday cyberscams—and how to avoid them.

Year-End Financial Planning Checklist

Start organizing your finances for the new year with this simple checklist.

Key Elements of a Nonqualified Deferred Compensation Plan

Learn about the potential advantages of nonqualified deferred compensation (NQDC) plans.

New IRS Withholding Tool

Learn how to use the new IRS withholding tool.

You’ve Been Hacked or Spoofed: Now What?

Learn next steps to take if your email gets hacked.

Understanding the Borrower Defense to Repayment Student Loan Forgiveness Program

Learn how to determine if the borrower defense to repayment student loan forgiveness program applies to you.
LOAD MORE