Metal Wheel Concept

Year-End Tax Planning

December 2018

The holiday season is in full swing with parties, shopping, concerts and school programs but before you get fully swept away in the chaos, now is a good time to consider some last-minute tax planning so April of next year isn’t so painful.  Here are some ideas to consider with the 2018 Tax Cuts and Jobs Act (TCJA):

Bunching Deductions – The new standard deduction was doubled ($12,000 to $24,000 for married filing jointly), exemptions were removed and SALT (state and local taxes) deductions are capped at $10,000 for 2018. This means it might be advantageous to alternate between taking the standard deduction one year and “doubling up” charitable, medical and property tax deductions in the other year.

Capital Gains/Losses – Now is a good time to review your realized capital gains and losses. Most mutual funds will also have an estimate, so you can see if you have paid-in enough to cover your tax bill or if you should capture any additional gains and losses before the end of the year.

Qualified Charitable Distribution (QCD) – If you are over 70 ½ and taking your Required Minimum Distribution (RMD) you can send a contribution directly to a charity. This distribution is not taxed on your personal return and the amount applies toward your RMD.

Roth Conversions – For 2018, the re-characterization is no longer an option. This means you should attempt to be as accurate as possible with your conversion amount because you cannot undo a portion of it like 2017 and prior years allowed.

Establish a Donor Advised Fund (DAF) – If your income is high for 2018, you might consider funding a DAF to reduce your income tax bill. The advantage of this fund is you receive the deduction when the contribution is made and can distribute the proceeds at any time in the future or even spread it out over years to come.

Estimated Taxes – A quick look at year to date income tax withholdings and payments will give you confidence you have paid in enough or possibly confirm you should make an estimated payment for Q4 by January 15th of 2019. Penalties haven’t changed but it is always better to plan ahead so you know what you truly can spend on the holidays.

Good luck in your planning and we wish you a Merry Christmas and Happy New Year!

“Year-End Tax Planning” was published in the December 2018 issue of Life on the Green magazine, a social publication for the residents surrounding The Woodlands, Country Club, Player Course, where Dan is a resident and is a featured monthly contributor.