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Tax Planning Tips for 2017 Year-End

Tax time seems far away, but as the end of 2017 approaches, and uncertainty grows about the proposed changes to our tax code, now is a good time to start thinking about some year-end tax moves that are available.  Several of these deductions are at risk of being eliminated or reduced under the proposed tax reform. This makes it even more important to strategize what is to your advantage before 2017 year end.

Harvest stock losses

If you have gains on stocks that you have sold during the year, it could be a smart move to sell stocks that are worth less than you paid for them before the end of the year.  These losses could be offset against other capital gains.

The reverse could also be important to consider.  Let’s assume you sold a stock earlier this year with a loss of $5,000.  Normally, your losses are limited to $3,000 per year, with the remaining $2000 in loss rolled forward to the next year.  By selling a stock with a gain of $2,000, you can take the entire loss this year.

Prepay your January mortgage payment

If you itemize deductions, you can deduct the interest you pay on your mortgage.  If you make your January mortgage payment in December, you will have 13 months of interest to deduct on your 2017 tax return.

Adopt a charity

If you itemize deductions, you may be entitled to claim a charitable deduction.  Be sure to make your donations to a qualified organization on or before December 31.  Non-cash donations are limited to the item’s current fair market value (FMV), generally what you could sell it for at a yard sale.  Special rules apply to certain donations such as vehicles.

Check IRA distributions

You must start making regular minimum distributions (RMDs) from your traditional IRA by the April 1 following the year in which you reach age 70 ½. Failing to withdraw your RMD by the applicable deadline may result in you owing the IRS an excise tax of 50% of the RMD shortfall.

Review your medical tax deductions

You may be able to deduct your unreimbursed medical expenses, particularly if you have had a large expenditure this year. For 2017, you can deduct eligible expenses that are more than 10% of your adjusted gross income (AGI) if you’re under 65 (7.5% if you’re over 65). You might consider having an elective or necessary procedure before year-end.

Beware of the Alternative Minimum Tax (AMT)

Sometimes accelerating tax deductions can cost you money by inadvertently triggering the AMT.

For example, state and local income taxes and property taxes are not deductible under the AMT. If you expect to be subject to the AMT in 2017, don’t pay the installments that are due in January 2018 in December 2017.

As usual, your ultimate reference for U.S. tax information is irs.gov


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