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14 November 2017

Last-Minute Tax Deductions That Are Critical This Year

Last-Minute Tax Deductions That Are Critical This Year

With President Trump’s bold tax reform plan on the table for 2018, there are sure to be plenty of changes in store. That means your tax strategies in 2017 are even more important than ever. Below is a quick rundown of some of the factors you may want to consider now to reduce your tax burden over the next two tax years.

Remember that this information should not be considered tax advice, since everyone’s tax levels and financial situations are unique. 

  • The stock market did well in 2017 but, if you managed to lose money on certain stocks, selling off corresponding long- or short-term shares that did well could offset your capital losses. The wash sale rules (repurchasing losses within 30 days) does NOT APPLY to gains. Conversely, if you had gains, you might want to consider selling losses to offset those gains. While you cannot replace the sold stock, you can replace it with similar investments. For example, if you sold a hospital stock, you could replace that with a hospital exchange traded fund.
  • If your business sustained a net operating loss in 2017, it might be wise to recover a portion of the taxes you paid in prior years now, since tax rates may be reduced in 2018 (which means you could recover less money in the future). 
  • Keep a close eye on changing tax brackets and the alternative minimum tax (AMT). The normal rules on accelerating or deferring expenses or income to avoid jumping to a new tax bracket or being hit with the AMT may change. Trump’s tax plan reshuffles the brackets and could possibly revoke the AMT altogether.
  • Charitable giving is especially important this year because, if your tax burden decreases in 2018, so will the value of your charitable contributions. Essentially, giving in 2017 may be more valuable to you (from a tax deduction perspective) than it may be in 2018. Consider establishing a donor-advised fund and place some future donations into that fund before December 31, 2017. Even though the charity will receive the funds in a future year, you will get the deduction in 2017.
  • Stay on top of deductions like Section 179 for business property and bonus depreciation. Both houses of Congress have proposed significant increases in the amounts that can be currently deducted. With most tax rates being reduced (and AMT being eliminated), if property is being acquired in 2018, consideration should be given to acquiring and placing it into service this year.
  • Currently there is a proposal to disallow long-term capital gains treatment when a business is selling self-created intangible property AFTER December 31, 2017. Consideration should be given to sell this property to a friendly party on the installment basis, lease back the intangibles and, for estate tax purposes, diminish the value of the closely held business. 

If any of these areas spark interest or questions, please contact us to discuss them further. While we may not know what next year will bring, we may have some limited planning opportunities. Remember, Our Job is to Put Money in Your Pocket!® Image Copyright: alexskopje / 123RF Stock Photo


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