Some Last Minute Advice Before the End of 2017

December 27, 2017, by John Norris

Over the past week, even on Christmas Day, I have been inundated with emails detailing things people should do before the end of the year in light of the recent tax legislation. Many of the so-called recommendations would take a few weeks to hammer out with an attorney, if not months, and time is of the essence. But, you know, some of that stuff sure sounded great….really clever.

However, there are still a few last minute things you can still do IF you hustle.

The list below is far from exhaustive, but highlights a few realistic last second items the average person might be able to do before December 31st. With that said, do NOT wait until 2:00 on this Friday (December 29th) to call your CPA, banker, attorney, or investment advisor in a panic. If you do so, the odds are you won’t be able to accomplish what you had wanted.

Here is some ‘11th hour’ food for thought, a late night snack if you will:

 

    • If you can wait until 2018 to “earn the money,” then do so!
      • Arrange with your employer to defer any year-end bonus until 2018.
      • Defer any pass-through income. The final bill allows firms like partnerships and S corporations to deduct 20% of certain business income. Unfortunately, this doesn’t apply to higher-earning professional service firms owned by doctors, lawyers, consultants, investment managers, etc.
    • Buy office equipment by December 31 to get six months’ worth of depreciation deductions in this year, understanding you aren’t trying to squeeze all of 2018’s capital expenditures into 2-3 days. That would/could be impossible.
      • For example, hustle to pay those 3-5 office computers you were going to buy in January.
      • Be forewarned, Best Buy and Office Depot are going to be slammed this weekend. Seriously.
    • Use your credit card to prepay known small business expenses.
      • For instance, extend subscriptions to professional journals, pay union or professional dues, enroll in (and pay tuition for) job-related courses, etc., to bunch into current year miscellaneous itemized deductions subject to 2% floor.
  • BASICALLY, DEFER ANY LAST MINUTE INCOME AND ACCELERATE INTO 2017 ANY BUSINESS EXPENSES YOU CAN.

 

  • Consider selling securities with paper losses to offset capital gains for the year.
    • This is good advice for any calendar year AND has nothing to do with the recent changes.
    • Unfortunately or fortunately as the case may be, you probably don’t have very many losses in your paper portfolio. I know our clients don’t.
  • Consider selling securities with paper gains to offset capital losses for the year.
    • This is good advice for any calendar year AND has nothing to do with the recent changes.
    • Admittedly, I don’t ordinarily have people ask me to realize gains for them at the tail-end of the year.
  • Make an IRA contribution (can be made by April 15 of next year) but additional tax deferred income can be earned if you make it earlier.
  • Make some gifts to family members take advantage of the annual gift tax exclusion.
    • This is good advice any calendar year PLUS your kids and grandkids will love you for it!

 

  • IF you have the ability to do so and IF you think you will use the higher standard deduction moving forward, go ahead prepay some or all of your 2018 charitable giving!
    • Be sure to let the powers that be know this is in lieu of your 2018 pledge/promise. Otherwise, they will happily take the largesse in 2017 and STILL expect your gift in 2018…and that is a quick way for a small charity to get upside down really quickly.
  • IN THE FUTURE, consider gifting low cost basis stock to your charity of choice as opposed to using your cash.
    • This allows the donor to take an immediate deduction for the full market value up to certain limits, while not having to pay any capital-gains tax.
    • This is good advice for any calendar year AND has nothing to do with the recent changes.
    • Practically speaking, it is probably too late this year to make this happen….scratch the probably. Trust me, securities custodians are already working overtime trying to process the requests they have already gotten.
  • Donors who have IRAs and are 70½ or older can contribute up to $100,000 of IRA assets directly to charity and have it count toward their annual RMD.

 

    • If possible, accelerate whatever state and local tax payments you can. While the bill specifically bars deductions for prepayments for 2018 state income taxes, there is no reason you shouldn’t make a generous estimate on your 4th Quarter 2017 taxes!
      • Just pay them before December 31st!
    • Pay any and all contested state taxes to deduct them this year while continuing to contest them in 2018
      • If you win, great! If you lose, you get the deduction.
  • Sorry, you CANNOT prepay your 2018 property taxes in Alabama!  

 

 

I hope this note finds you well, and perhaps there is/are a few suggestions in here which might save you a buck or two either this year or next.

Let me close by giving my many thanks to all who have made 2017 a wonderful year.

 

John Norris