It’s rarely a good idea to implement financial planning strategies before legislation is finalized. But similarities in the House and Senate versions of the new tax bill cause us to deliver some standard year-end advice with a bit more urgency.
1. Accelerate deductions. With expected reductions in tax rates and the possible loss of many deductions going forward, you could benefit from accelerating your expenses into 2017. Some things you might consider prepaying:
It’s important to stay abreast of the new tax law as it develops and consult with your tax advisor before implementing a strategy.
• state & local income & property taxes
• charitable donations
• medical expenses (already-scheduled procedures or costs you’ve already incurred)*
*For new retirement community residents: a meaningful tax deduction can usually be claimed in the initial year when an entry fee is paid to a continuing care retirement community (CCRC). Entry fees are often significant, and the person who pays that bill can deduct a percentage of the entry fee and monthly fees as medical expenses, regardless of the health status of the new CCRC resident.
• miscellaneous deductions such as tax-preparation costs or casualty losses
2. Defer income. Again, with the expected reduction in tax rates, it might make sense for some people to shift income to 2018 if possible.
3. Set up a donor-advised fund. A contribution to a donor-advised fund provides immediate tax benefits. You can take a charitable deduction in 2017 for the full amount of your contribution (subject to income limitations), with flexibility for making recommendations in future years about how those dollars get distributed to charities. Donor-advised funds are relatively easy to set up, but the account-opening process can take several days. Deadlines for donating securities vary depending on the type and location of the asset, and the final contribution deadline is December 22. If you are considering a donor-advised fund, please contact TGS immediately.
For business owners, especially pass-through entity owners, the impact of the tax law is potentially significant. Business owners should discuss the complexities and action steps with their accountants as soon as possible.
It’s important to stay abreast of the new tax law as it develops, and, of course, you should always consult with your tax advisor before implementing a strategy. We’re here to help you navigate these decisions and we welcome the opportunity to collaborate with your CPA. Please call us if you or your friends and family have questions, or if you need help in any way.
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