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
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.
Here are some year-end tax strategies that clients facing higher taxes next year should consider, courtesy of Gorman:
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.
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.
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.
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."
|09/25/2018||Important Legal Documents for College Students||Learn why your 18-year-old should have a health care proxy and durable POA in place.|
|08/20/2018||5 Ways Criminals Use Social Engineering to Scam Us||Learn five ways criminals use social engineering to scam you.|
|07/23/2018||The Basics of Credit Scores and Credit Reports||Learn what a credit score is, how it is calculated, and how to improve yours.|
|06/25/2018||Is Your W-4 Withholding Accurate?||Learn how to determine an accurate W-4 withholding.|
|05/21/2018||New Developments in the Public Service Loan Forgiveness Program||Learn about new developments in the Public Service Loan Forgiveness Program.|
|04/23/2018||Are You Making These Security Mistakes with Your Smartphone?||Learn about five security faux pas you may be making—and how to fix them.|
|03/24/2018||What Should You Do if You Are a Victim of Tax Identity Theft?||Learn what to do if you are a victim of tax identity theft.|
|02/16/2018||Mortgage and Home Equity Loan Interest Deductions Under the Tax Cuts and Jobs Act||Learn how the Tax Cuts and Jobs Act has affected mortgage and home equity loan interest deductions.|
|01/22/2018||ABLE Accounts: Frequently Asked Questions||Learn the answers to some commonly asked questions about ABLE accounts.|
|12/18/2017||Year-End Financial Planning Checklist||Get tips for organizing your financial life in 2018.|
|11/20/2017||Which College Savings Plan Is Right for You?||Learn the advantages and drawbacks of three college savings plans.|
|10/23/2017||Should You Pay Off Your Mortgage?||Which debt is better to pay off first—your credit card or your mortgage? Here are some guidelines.|
|09/26/2017||Is the Cloud Secure Enough for Me?||Learn what to look for when deciding on a cloud service provider.|
|08/18/2017||Medicare Basics You Need to Know||When should you enroll in Medicare? What plan should you choose? Here are some guidelines.|
|07/25/2017||The Family Conversation: Addressing Your Health Care Needs in Retirement||Use these questions to help guide your next family conversation to a more effective outcome.|
|06/26/2017||What We Learned from the WannaCry Ransomware Attack||Follow these four tips to avoid falling victim to ransomware attacks like WannaCry.|
|05/22/2017||Why You Need an Estate Plan for Your Digital Assets||Here's how you can help ensure that others can access your online accounts after you pass away.|
|04/25/2017||Public Service Student Loan Forgiveness: What You Should Know||Here's a primer on the current requirements for the federal student loan forgiveness program.|
|03/28/2017||5 Ways to Spot a Phishing E-Mail||Protect your sensitive information by learning some telltales signs of a scam.|
|02/21/2017||What to Ask When Your Adult Child Moves Home||Get tips for setting expectations and keeping your own finances on track.|
|01/24/2017||To Pay or Not to Pay: How to Survive a Ransomware Attack||Learn how to protect yourself against this cyber threat.|
|12/26/2016||Financial New Year’s Resolutions: Using Tech to Stay on Track||Learn about apps that can help you with saving and budgeting.|
|11/21/2016||Year-End Financial Planning Checklist||Get tips for organizing your financial life in 2017.|
|10/24/2016||Estate Planning: It’s for Everyone||Estate planning is a vital component of your financial well-being—and one that’s best tackled sooner rather than later.|
|09/26/2016||Deleting Sensitive Information? Don’t Rely on Your Recycle Bin||Learn about ways to permanently remove data from your computer.|
|08/29/2016||Making the Most of Life Insurance Tax Benefits||Get an overview of three key tax features available via life insurance.|
|07/26/2016||Wedding Finances: A Survival Guide||Get tips for keeping wedding expenses in check, whether you're the host or a guest.|