Atlanta Financial Newsroom

Ten Year-End Tax Tips for 2017

AFA
November 16, 2017

This year, with the possibility of tax reform being passed prior to year-end, it is especially important to consult your advisor and/or tax professional for customized advice, since the changes to tax law may mean deferring income or accelerating expenses may or may not be right in every situation.

Here are 10 things to consider as you weigh potential tax moves between now and the end of the year.

  1. Set aside time to plan
    Effective planning requires that you have a good understanding of your current tax situation, as well as a reasonable estimate of how your circumstances might change next year. There’s a real opportunity for tax savings if you’ll be paying taxes at a lower rate in one year than in the other. However, the window for most tax-saving moves closes on December 31, so don’t procrastinate.
  2. Defer income to next year
    Consider opportunities to defer income to 2018, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rents, and payments for services. Doing so may enable you to postpone payment of tax on the income until next year.
  3. Accelerate deductions
    You might also look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, making payments for deductible expenses such as medical expenses, qualifying interest, and state taxes before the end of the year, instead of paying them in early 2018, could make a difference on your 2017 return.
  4. Factor in the AMT
    If you’re subject to the alternative minimum tax (AMT), traditional year-end maneuvers such as deferring income and accelerating deductions can have a negative effect. Essentially a separate federal income tax system with its own rates and rules, the AMT effectively disallows a number of itemized deductions. For example, if you’re subject to the AMT in 2017, prepaying 2018 state and local taxes probably won’t help your 2017 tax situation, but could hurt your 2018 bottom line. Taking the time to determine whether you may be subject to the AMT before you make any year-end moves could help save you from making a costly mistake.
  5. Bump up withholding to cover a tax shortfall
    If it looks as though you’re going to owe federal income tax for the year, especially if you think you may be subject to an estimated tax penalty, consider asking your employer (via Form W-4) to increase your withholding for the remainder of the year to cover the shortfall. The biggest advantage in doing so is that withholding is considered as having been paid evenly through the year instead of when the dollars are actually taken from your paycheck. This strategy can also be used to make up for low or missing quarterly estimated tax payments.
  6. Maximize retirement savings
    Deductible contributions to a traditional IRA and pre-tax contributions to an employer-sponsored retirement plan such as a 401(k) can reduce your 2017 taxable income. If you haven’t already contributed up to the maximum amount allowed, consider doing so by year-end.
  7. Take any required distributions
    Once you reach age 70½, you generally must start taking required minimum distributions (RMDs) from traditional IRAs and employer-sponsored retirement plans (an exception may apply if you’re still working for the employer sponsoring the plan). Take any distributions by the date required — the end of the year for most individuals. The penalty for failing to do so is substantial: 50% of any amount that you failed to distribute as required.
  8. Weigh year-end investment moves
    You shouldn’t let tax considerations drive your investment decisions. However, it’s worth considering the tax implications of any year-end investment moves that you make. For example, if you have realized net capital gains from selling securities at a profit, you might avoid being taxed on some or all of those gains by selling losing positions. Any losses over and above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 if your filing status is married filing separately) or carried forward to reduce your taxes in future years.
  9. Beware the net investment income tax
    Don’t forget to account for the 3.8% net investment income tax. This additional tax may apply to some or all of your net investment income if your modified AGI exceeds $200,000 ($250,000 if married filing jointly, $125,000 if married filing separately, $200,000 if head of household).
  10. Get help if you need it
    There’s a lot to think about when it comes to tax planning. That’s why it often makes sense to talk to a tax professional who is able to evaluate your situation and help you determine if any year-end moves make sense for you.

Share This:

Share on facebook
Facebook
Share on linkedin
LinkedIn
Share on twitter
Twitter
Share on google
Google+

4 Estate Planning Tips When You Have Young Children

1. Write a Will
For most young parents, writing a will is less about distributing assets and more about naming a guardian for their children. The guardian named in your Will is the person that would take care of your children if you and the other parent were unable to do so. This situation is very unlikely, but worth addressing just in case.

If your children ever needed a guardian, the local Probate Court would appoint the person designated in your Will, absent a serious problem with that person. You can name different guardians for different children if you wish. If you do not have a Will with a Guardianship Designation, or if you haven’t made your wishes in the Will clear, the Probate Court would have to select a guardian for your children without any guidance from you. The most common choice is a family member. But what if you really wouldn’t want a certain family member to raise your children? Or what if you preferred that a close friend step in as guardian? The Court would have no way of knowing your wishes.

Read More »

How Much Will Your Social Security Increase in 2020?

You may have heard that the Social Security Administration officially announced that Social Security recipients will receive a 1.6% cost-of-living (COLA) adjustment for 2020. Those increased payments will start in January 2020.  The purpose of the COLA is to help the purchasing power of Social Security benefits keep pace with inflation.  Congress first enacted the COLA provision as part of the 1972 Social Security Amendments, with automatic annual COLAs began in 1975.  Before that, benefits were increased only when Congress enacted special legislation. 

Read More »

Atlanta Financial’s 11th Annual Holiday Open House

The holidays are the perfect time to express our thanks for your business and to think about those less fortunate. Please join us for our 11th Annual Holiday Open House and Toys for Tots Collection on Thursday, December 12, 2019, 11:30 am – 1:30 pm at our office – 5901-B Peachtree Dunwoody Road, Suite 275, Atlanta, GA 30328. Lunch will be served.

Read More »

Congratulations Harrison Fant on Five Years with Atlanta Financial

All of us at Atlanta Financial want to congratulate Harrison Fant on recently passing his five year anniversary at Atlanta Financial in September. Since joining AFA in 2014, Harrison has rapidly ascended through the different positions to his current position as Wealth Manager. Harrison has a unique combination of technical financial planning skills and the ability to present those complex concepts in easily understandable ways to all of his clients.

Read More »

Yearly Archive

Author Archive