December is in the home stretch, which means crunch time for 2017 year-end planning!  While it’s important to remember that each taxpayer has a unique situation, and therefore no sweeping generalizations are good to make – below are a few items to consider, especially with 2018 tax reform top of mind.  See my previous blog post for details of what’s in the tax reform bill.

  • The adage of accelerating deductions into this year and deferring income into next year is going to be a good one for many.
    • Wait until 2018 for Roth conversions or defer contracts into 2018 if you’re able and think your 2018 tax rate will be lower.
    • If you normally itemize, make your January home mortgage payment in December to get the extra interest, pay your winter property tax bill now, or make additional charitable contributions before year-end. With lower overall tax rates in 2018, 2017 deductions could be worth more to you.
  • Along the lines of accelerating deductions; this is especially true for state taxes, as itemized state taxes are going to be limited going forward. Make those fourth quarter estimates before year-end for anticipated 2017 tax due.  That last part is important; if you try to get cute and massively overpay in hopes of taking care of 2018 taxes as well, it will be considered a prepayment and not an itemized deduction for 2017.  High income folks, watch out for AMT here though.
  • Buy equipment that you NEED for your business; there’s no sense in big spending to save tax dollars if you don’t have a need for what you’re purchasing.
  • Entertain clients’ hearts out before year-end! The 50% deduction for such business-related activities is going away beginning in 2018.
  • Maximize NOLs and carryback. Net operating loss rules are changing to eliminate the carryback from two years to zero, or from five years to 2 years for farmers.  That means, if you have tax, especially in higher brackets in those prior years, the ability to go back and recoup those funds is going away after the 2017 filing.  If you anticipate your situation to owe less under new tax law in 2018, with lower brackets, passthrough deductions, and increased expensing – then NOL carryback rather than carryforward would likely do some good.
  • Harvest investment losses. Review your stock portfolio and sell off losing stocks to offset your gains.  Taxpayers can deduct up to $3,000 in capital losses each year.
  • With miscellaneous itemized deductions going away beginning in 2018, that means unreimbursed employee expense deductions are too. If you are an employee that has a lot of unreimbursed expenses, try to pay and deduct as much as you can yet in 2017.

Again, it’s important to understand your entire tax and monetary picture before doing anything drastic.  Talk with your advisors to see what makes sense for you and/or your business.