Congress is currently working on a massive tax reform proposal that could change many aspects of income tax law. It is uncertain what the final version of the bill will look like or if anything will get passed at all, but there are still income tax planning opportunities available under the current law. We highlight below a few strategies you may want to consider before the end of the year to reduce your 2017 taxes.
- Postpone income until 2018 and accelerate deductions into 2017 including:
- Maximize your charitable contributions including prepayment of athletic event seating donations.
- Prepay real estate taxes, state income taxes and miscellaneous itemized deductions (e.g., investment fees) unless you are in an alternative minimum tax situation.
- Defer any year-end bonuses.
- If you have a health savings account (HSA), maximize your contributions for 2017 in December.
- For individuals age 70 ½ or older, consider making charitable gifts up to $100,000 per person directly from your individual retirement account (IRA).
- Maximize your retirement plan contributions.
- Reduce potential capital gains by selling securities in a loss position.
We also want to alert you to some new rules that will affect our partnership and LLC clients.
- Beginning with partnership tax years starting on or after January 1, 2018, the partnership will be liable for any assessments levied on prior years’ tax returns.
- This will eliminate the need to proceed against individual partners.
- Current partners will be held responsible for tax liabilities of prior partners.
- The “tax matters partner” will be replaced with a “partnership representative.”
- This person will have complete authority to act on behalf of the partnership and the partners when dealing with the IRS.
- This person also has the authority to make various elections.
In light of these changes, we recommend you review your partnership or LLC agreement with your attorney as soon as possible to ensure it addresses the significant changes required.
If you would like our assistance with any of your year-end planning questions, please let us know.