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Year-End Tax Planning Tips for 2017

It’s almost impossible to predict what tax reforms, if any, may occur. Nonetheless, with year-end approaching, tax planning should be a top financial priority. Use these year-end tax planning tips to take stock of your current tax planning and set a confident course for 2018.

1. Reduce Taxable Income Through Pre-Tax Contributions

One of the best ways to reduce taxable income is through pre-tax contributions to a company retirement plan, self-employed retirement account or IRA. Traditional contribution limits are as follows for 2017 and 2018. (For related reading, see: Should You File an Early Tax Return?)

 Plan Type

Contribution Limits * 2017

Contribution Limits * 2018

401(k)2, 403(b), TSP Elective Deferrals



Age 50+ Catch-up



Solo 401(k) & SEP IRA Plans



Simple Elective Deferrals



Age 50+ Catch-up



Traditional & ROTH IRAs **



Age 50+ Catch-up



* Income limitations apply.

** Contributions to Roth accounts don’t reduce current year taxable income, but all future earnings and withdrawals are exempt from further taxation.

Planning Tips:

  • Contributions to a company plan can provide an immediate return if a matching program exists. You might need to spread contributions throughout the year to qualify for maximum benefits.
  • Self-employed individuals who are considering a solo 401(k) must establish the account before year-end.
  • Individuals age 50 and older must make formal elections to take advantage of catch-up contributions.

2. Don't Forget to Take Required Minimum Distributions

There’s a hefty 50% tax penalty for failing to take a required minimum distribution (RMD)  if you’re 70 ½ or older, or have an inherited IRA. (For related reading, see: Best Way to Avoid RMD Tax Hits on IRAs.)

Planning Tips:

  • Process your RMD before December 31.
  • If you just turned 70 ½, you may be entitled to defer your first RMD. A qualified financial advisor can help determine if this election is beneficial for you.

3. Minimize Capital Gains

Minimizing capital gains and realizing investment losses can help reduce your tax burden. Be sure to review any personally managed investment accounts. If you sell an asset at a loss, you can’t re-purchase the same or any "substantially identical" investment for 30 days, or you risk triggering a wash sale and foregoing the loss. However, you might be able to find a replacement investment that’s a little different so that you can stay invested while also capturing a tax benefit.

4. Make Tax-Deductible Charitable Contributions

Tax-deductible charitable contributions can help reduce your taxable income. Contributing appreciated securities has multiple benefits: you receive a tax deduction for making the gift, and avoid a future capital gain tax liability from your investments. The charitable organization gets the same benefit and doesn’t owe taxes upon receipt or sale of the shares. Tax planning is strongly recommended to ensure you’re aware of itemized deduction phase outs, deduction limits and more.

Planning Tip:

  • Remember to replenish your investments with cash to stay invested, as appropriate.

5. Estimate Tax Payments If Income Changed

If your income changed in 2017 or if you make estimated tax payments, we recommend careful planning before year-end to determine if your taxes are potentially over- or under paid and if any estimated tax payments might be due. Accelerated payment of your estimated state tax payment before December 31st could afford you additional itemized deduction benefits in tax year 2017. Conversely, it could also trigger alternative minimum tax (AMT) exposure.

6. Claim Medical Expenses

Medical expenses are one of many itemized deductions you can claim to reduce your taxable income. You can deduct only the amount of total medical expenses that exceed 10% of your adjusted gross income.

7. Pay for Medical Expenses Using Pre-Tax Dollars

Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) allow you to pay medical expenses using pre-tax dollars. Unused dollars in HSA accounts can accumulate as retirement savings. However, most FSAs operate on a ‘use it or lose it’ premise. (For related reading, see: Year-End Tax Planning for Your Investments.

Planning Tips:

  • Check with your employer as some FSAs allow a small carryover. If not, be sure to use up any FSA balance before year-end.
  • Year-end might also be the time when you have to make elections for next year.

8. Fund a College Savings Plan

If you have family or friends with college savings needs, you might wish to consider funding a college savings plan before year-end. We typically recommend 529 plans which offer tax-deferred savings, increased annual gifting limits and state tax deductions in many states.

9. Tax Planning Opportunities for Business Owners

Business owners should always consider year-end tax planning opportunities carefully, such as timing of expenditures, personal compensation decisions, employee benefit offerings, etc. We recommend working with professionals to discuss specific planning opportunities and to coordinate tax, business and personal decisions.

10. Consider a Roth Conversion

A Roth IRA conversion is particularly important if this may be a low or negative income year. Any amount converted triggers taxable income, but offsetting business losses or a low income tax year might allow you to convert some amount with little to no tax cost. The amount converted remains tax free, providing lifetime tax-free savings.

11. Tax-Free Gifts

There are many ways to provide economic support to family members while maximizing tax advantages for yourself. However, be sure to consider gifting considerations relative to your own financial security and broader family objectives.

Planning Tips:

  • Individuals can transfer up to $14,000 per person for 2017 without triggering gift tax or taxable reporting requirements.
  • Section 529 college savings plans offer tax-advantaged educational savings (see above).
  • Larger gifting transfers require more advanced strategies and consideration of future tax changes.

12. Review Trust Income

If you’re the trustee or beneficiary of a trust, be sure to review net trust income and distribution elections. Some elections to beneficiaries can defer into early next year but it’s best to be prepared, especially as trusts currently reach the top IRS tax bracket of 39.6% at the lower threshold of $12,500 income.

As your wealth grows, end-of-year tax planning decisions become increasingly significant and complex, especially in light of the potential for sweeping tax code reform. (For related reading, see: 10 Money Saving Year-End Tax Tips.)


The information contained herein is obtained from sources believed to be reliable, but its accuracy or completeness is not guaranteed. This article is for informational purposes only. The views expressed are those of SageVest Wealth Management and should not be construed as investment advice. All expressions of opinions are subject to change and past performance is no guarantee of future results. SageVest Wealth Management does not render legal, tax, or accounting services. Accordingly, you, your attorneys and your accountants are ultimately responsible for determining the legal, tax and accounting consequences of any suggestions offered herein.

In accordance with IRS CIRCULAR 230, we inform you that any U.S. Federal tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used by a taxpayer, for the purpose of (a) avoiding penalties under the Internal Revenue Code or that may otherwise be imposed on the taxpayer by any government taxing authority or agency, or (b) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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