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Your Year-End Tax Planning Guide

December 14, 2017

iStock-612387134.jpgThis is an especially difficult year to do year-end tax planning. With major tax overhauls proposed in both the House and the Senate, it seems likely that substantial changes are coming for 2018.  As of this writing, however, it is still unclear which provisions will be enacted, or even if a tax bill will be completed at all.


With that in mind, we would like to share with you some actions you may wish to consider taking before the ball drops on New Year’s Eve. We’ve organized these into three groups: preparing for tax law changes, saving money with this year’s taxes and items that need attention every year.

Before taking any action based on possible new tax code provisions or the strategies outlined in this letter, we strongly encourage you to consult with your tax professional.

Preparing for changes in the law

The biggest proposed change affecting most people’s income tax is that many itemized deductions are being eliminated and the standard deduction is being increased. If passed into law, this will mean that many of you will have lower itemized deductions or will take the standard deduction, thus in effect having no itemized deductions. Some implications for this year’s tax planning are:

  1. Property taxes will either not be deductible, or the amount will be capped. Therefore, prepay any installments of your property tax that are due next year but are eligible to be paid this year. (However, if you are subject to the Alternative Minimum Tax (“AMT”) in 2017, this may not be a good idea.)
  2. Similarly, you should make sure that by December 31 you fully pay your 2017 state and local income taxes this year, including any portion that you would normally pay in January or April 2018. (The same caveat about AMT applies here.)
  3. While charitable gifts are expected to remain deductible for itemizers, many fewer people may be itemizing. If you might be taking the standard deduction starting next year, consider making additional charitable gifts this year when you can still benefit from the deduction. One way to do so is by contributing to a “donor-advised fund” and then using this fund to make future gifts.
  4. Speaking of AMT, it may be abolished starting next year. One effect of getting rid of AMT will be to make it more attractive to exercise Incentive Stock Options (ISOs) and hold onto the stock received, rather than sell it immediately.  If you have any ISOs, it may make sense to wait until January to exercise them to avoid AMT.  (Anything to do with stock options is complex. Please check with us and your tax adviser if you think this might apply to you.)

Saving money on your 2017 taxes

In addition to those items listed above, here are some ways to cut your taxes that are unlikely to be affected by new tax rules:

  1. Harvesting losses – If you have losses on any of your investments in non-retirement accounts, you can sell them to recognize the loss and use it to offset gains that you have recognized on other securities, eliminating the need to pay capital gains tax.
  2. Harvesting gains – If you have low or even negative (due to business losses or deductions) taxable income, you can recognize gains by selling appreciated assets. This income would then incur little or no tax, due to your low tax bracket.
  3. Roth conversions – Another way to take advantage of being in a low or zero tax bracket is to convert part of your IRA to a Roth IRA. While the amount converted becomes taxable income this year, the Roth has the potential to grow tax sheltered and there’s no tax due when you eventually take the money out of it. This can be a great move if you are in a lower tax bracket now than you expect to be in retirement, when you will have income from Social Security, required IRA distributions and investments.

Annual housekeeping items

While these items don’t necessarily provide any immediate tax savings, they need to be attended to each year:

  1. Required Minimum Distributions (RMD) – Those of you who are over age 70½ or have inherited IRAs generally need to take minimum distributions from at least some of your retirement accounts. The RMDs must be withdrawn by December 31 and the penalty for failing to do so is stiff. We calculate and track these for the accounts we manage, but if you any other accounts, please be sure to take your RMDs from them as well. We will be happy to help you figure out the right amount to take and the optimum account(s) or asset(s) from where to draw it.
  2. Retirement account contributions – If you can contribute more to a 401(k) or 403(b) at work, now’s the time to increase your withholdings to get a tax deduction this year. (IRA contributions don’t have to be made until April 15, 2018.) If you have a small business retirement plan such as a SEP or single-person 401(k), you can generally make your contributions for 2017 in early 2018, once your income for the year has been calculated. However, if you want to set up a new 401(k) plan, please contact us right away, as that has to be done by year-end, even though you can fund it next year.
  3. Personal gifts – Gifts to family members or others that take advantage of the annual gift tax exclusion of $14,000 per person need to be completed (i.e. the check must be cashed) by December 31.
  4. Education expenses – Reimbursements from 529 plans for college tuition and other expenses must be paid in the same year that the expense was incurred.New Call-to-action
We’ve covered some of the main points of year-end tax planning and hope that you find this list useful. However, taxes are complex and changes are afoot, so please check with us and your tax professional about what may be best for your personal situation. We look forward to working together to develop and execute tax management and other strategies to help you get the most out of your money.  

United Capital Financial Advisers, LLC (United Capital) provides financial guidance and makes recommendations based on the specific needs and circumstances of each client. For clients with managed accounts, United Capital has discretionary authority over investment decisions. Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. The information contained in this blog is intended for information only, is not a recommendation, and should not be considered investment advice. Please contact your financial adviser with questions about your specific needs and circumstances. This blog is a sponsored blog created or supported by United Capital and its employees, organization or group of organizations. This blog does not accept any form of advertising, sponsorship, or paid insertions. Certain authors of our blog posts may be influenced by their background, occupation, religion, political affiliation or experience. It is important to note that the views and opinions expressed on this blog are that of the owner, and not necessarily United Capital Financial Advisers. As a Registered Investment Adviser, United Capital does not allow any testimonials on their blog, and any comments deemed as such United Capital will remove.

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Eric Lewis, CFA, CFP®

Written by Eric Lewis, CFA, CFP®

Eric Lewis is a Managing Director at the United Capital Silicon Valley office. He revels in complex client portfolios. Eric received a Bachelor of Arts from Princeton University and an MBA from Harvard Business School. He is a CFA Charter holder and a CFP®. When Eric’s not working, traveling, volunteering or hanging out with his family, he likes to hike and cycle the beautiful trails around the Bay.

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