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Tax Planning for the Remainder of 2017

Thursday, October 5th, 2017 | Uncategorized | No Comments

With nine months of 2017 already behind us, it is time to start looking at your year-end tax planning. Given the possibility that we will not see tax reform legislation in 2017, we will examine what we do know is in place at this time.

The Net Investment Income Tax (NIIT) remains in place, as no changes have been made to the Affordable Care Act.  The NIIT is an additional tax on certain individuals, estates, and trusts that have investment income above their applicable threshold. If you have been subjected to the NIIT in the past or think you may be this year, look for ways to lower your modified adjusted gross income. Options to lower your modified AGI include using capital losses to offset capital gains, distribute funds from an IRA directly to a charity, or make charitable contributions of appreciated long-term property.

If you have reached age 70½, don’t forget your required minimum distribution (RMD) for any 401(k)s and IRAs you may have. Failure to take a RMD can result in a penalty of 50% of the amount of the RMD.

Another area to consider on retirement accounts is for those who are still working or have earned income and have not reached age 70½. If you or your spouse fall into this category, consider maximizing your IRA, 401(k), or retirement plan contributions.

If you have missed making required estimated tax payments or think you may have underpaid your estimated tax, consider having more tax withheld from your RMD to pay your estimated tax. You may be able to avoid a penalty.

If you normally itemize deductions, take advantage of the bunching strategy to increase you itemized deductions.  This is most effective in increasing non-recurring miscellaneous and medical deductions that are subject to limitations based on your adjusted gross income. As you approach year-end, review your medical statements for any outstanding balances you may want to pay this year rather than making the payment in 2018. The bunching strategy also applies to real estate taxes, as well as state income tax estimated payments.

The sales tax deduction is now permanent as an itemized deduction. If you are considering the purchase of a large ticket item such as a motor vehicle, RV, or boat, you may want to complete the purchase before year-end. If you use the sales tax tables rather than the actual sales tax paid, remember the items that qualify for the “large ticket” deduction must be from the specific list of items found in the instructions for Schedule A.

For questions related to this or other financial or tax related issues, contact our office at 856-986-4035.

This article is intended for reference only. As the information is designed solely to provide guidance to the readers, it is not intended to be a substitute for someone seeking personalized professional advice based on specific factual situations. Although Allen A. Scott, CPA has made every reasonable effort to ensure that the information provided is accurate, Allen A Scott, CPA and its managers and staff make no warranties, expressed or implied, on the information provided.  The reader accepts the information as is and assumes all responsibility for the use of such information.

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East Tennessee's Mountain Views

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