Ten Year-End Tax Strategies to Utilize Before They Expire
Creatas/Thinkstock
1. Accelerate your income tax deductions.
JuliaMag/iStock/Thinkstock
Pay your January estimated taxes in December. Make your January mortgage payment in December. Make your 2017 charitable donations in 2016.
2. Postpone receipt of income.
Ingram Publshing/Thinkstock
For cash-basis taxpayers, delay year-end billings. Defer payment of dividends from your C corporation until 2017. If possible, contribute additional funds to your retirement plans.
3. Don’t buy any capital assets this year.
Ridofranz/iStock/Thinkstock
Under Trump’s proposal, a business will be able to expense the entire purchase.
4. Make gifts to charities and family foundations with appreciated assets.
a. Consider gifting low-basis stock instead of selling it to raise cash for gifting that could lead to gains.
b. Determine liquidity needs in the foundation to meet the requirement to pay 5 percent of the value of a foundation’s net investment assets.
c. Fund a charitable remainder trust with concentrated positions in appreciated securities to diversify without adverse tax consequences associated with selling appreciated securities.
5. Harvest losses to offset capital gains.
mamanamsai2/iStock/Thinkstock
Be aware of the capital gains that may be distributed to you from your mutual funds near the end of the year. Take advantage of those securities that are experiencing a loss, using the tax savings to offset your gains.
6. Establish and fund qualified plans.
Copyright Joe Raedle, Getty Images
Consider making a gift of up to $5,500 to either a traditional or Roth individual retirement account for your children or grandchildren who aren’t funding their own IRAs, but have enough earned income to report.
7. Identify assets and amounts to make proper grantor retained annuity trust distributions before April 17, 2017.
If the annuity payment date is tied to the end of the trust’s taxable year, the payment must be made no later than the date the trust’s income tax return is due.
8. Make annual exclusion gifts to chosen loved ones of $28,000 (per married couple).
a. Make gifts into trusts for children and/or grandchildren.
b. Contribute to Internal Revenue Code Section 529 plans, which grow free of income tax.
c. Make unlimited gifts directly to educational institutions and medical facilities.
9. Make distributions of income from trust accounts and estate accounts to lower the income tax liability.
AlexandrRybitskiy/iStock/Thinkstock
Estates and trusts are taxed at the highest income tax rate (and a lower threshold at which the 3.8 percent Medicare surtax applies); therefore, it may make sense to distribute income to the beneficiaries to be taxed at the beneficiary’s lower income tax rate.
10. Host annual meetings for your family office, partnerships and foundations.
David_Rey/iStock/Thinkstock
Discuss and plan for your family mission, family business interests and family donation patterns. Document and create minutes for all of the meetings.
