Financial Moves in the New Year

December 20, 2017

Checklist to reduce taxes in 2018

If you sold your business or retired, you potentially owe more taxes this year than any year in the rest of your life. Plan now to make sure you meet important year-end financial deadlines to avoid a “blue Christmas”.

401(k):

  • Increase retirement plan deferrals, and strive to maximize contributions:
    • $18,000 ($24,000 if over 50). *
  • If you are “self-employed” you can contribute up to:
    • $48,000 ($59,000 if over 50). *
  • Start your own 401k, if you are now self-employed and doing consulting work. You can contribute additional monies, even if you maxed out your prior 401k.

State Taxes. Consider prepaying state taxes before end of year. This will offset your Federal tax bill.

IRA Contribution. You (and your spouse) can still contribute, even if you contribute to a 401k. Income limits apply.

Bonus. Consider deferring year end bonuses until next year.

Capital losses. If you have any unrealized investment losses, consider capturing them.

Charitable contributions – double/triple up. Charitable donations made by years end will be deductible this year, including donations to most universities. Consider giving next year’s (or multiple years) contributions this year as well.

Health Savings Accounts. Consider maximizing contribution of $7,750 (over 55) per family. These are different/better than Flexible Savings Accounts.

Group together deductible expenses. Consider “bunching together” tax-deductible expenses for the end of this year (property taxes,).

Refinance your home. Some of the expenses will be deductible this year, and you will lock in some of the lowest interest rates of my lifetime.

College savings. Consider contributing up to $10,000 per child (IDEAL – State of Idaho)

Roth Contribution. You won’t get a tax break, but your investments will grow tax free.

Roth Conversion. If you believe your taxes will be higher next year, or in the future, consider a Roth conversion. They have tremendous long-term tax advantages.

Gifts to individuals. You can make tax-free gifts to individuals up to $14,000 per person this year.

Index Funds. Consider switching from mutual funds to index funds. They are more tax friendly, and IRA investment costs may be tax deductible.

This material is provided for information purposed only. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Kelly Wood and not necessarily those of RJFS or Raymond James. Investment Advisory Services are offered through Raymond James Financial Services Advisors, Inc. You should discuss any tax or legal matters with the appropriate professional.