October 18, 2017 | Posted in:

Primer on Individual Tax Planning

Tax planning is a year-round exercise. If you haven’t given thought to your 2017 tax return yet, Rich Middleton, CPA proposes 8 tax planning considerations that aren’t too late to implement.

If you’re thinking about tax planning now, the bad news is you’re already five months late.  Generally speaking, a good time to start planning is soon after filing your prior year tax return while information is fresh on your mind.  However, there’s still time to initiate and complete moves that could save or defer taxes.  Following are some general ideas to consider:

Retirement Contributions

  1. Max out a 401-K if your employer provides one. The maximum contribution for 2017 is $18,000. If you’re 50 years or older, you can defer an additional $6,000 per year.
  2. If you’re employer does not sponsor a retirement plan, consider a traditional or Roth IRA. You can contribute up to a maximum of $5,500 plus an additional $1,000 if you’re 50 years or older. Your Roth contribution may be limited based on your income.


Capital Gain and Loss Strategies

  1. Harvest tax losses on investments such as stocks, bonds and mutual funds. Sell investments that have unrealized losses to shelter investment gains realized during the year.  If losses exceed gains, you can deduct up to $3,000 against other income on your federal return.  Excess losses can be carried over to future years on your federal tax return.
  2. Consider selling investments with unrealized gains to offset realized investment losses. This works well in a state such as New Jersey that doesn’t allow the $3,000 offset against other income or the carryover of unused investment losses.  This strategy will lock in that unrealized gain and you can repurchase that same security at a higher basis if it’s still a desired piece in your portfolio.  Don’t worry about “wash sales” rules on the security repurchase, they only apply to sales at a loss.


Alternative Minimum Tax

  1. If the Alternative Minimum Tax (AMT) is going to trap you, consider accelerating income into 2017 if you anticipate being in a higher tax bracket next year. This entails a multi-year evaluation of your tax picture to place the maximum income into the lower rate year.
  2. With AMT, you should consider deferring expenses such as state and local income taxes, real estate taxes and miscellaneous itemized deductions which are added back to alternative minimum taxable income. Once again, take a multi-year approach.
  3. If AMT is not an issue, consider prepaying itemized deductions such as charitable contributions, state and local income taxes, real estate taxes, mortgage interest and miscellaneous itemized deductions. At the same time, defer income wherever possible.


Charitable Contributions

  1. Feeling charitable? Have a security with a large unrealized gain that you’ve held for more than 12 months?  Don’t sell it and donate the proceeds, gift the security to a qualified charitable organization.  In general, you’ll get a charitable deduction at the security’s fair market value and avoid the tax hit on the gain.  Do your homework as there can be limitations on the deduction based on income and type of organization.

A final note regards the current status of tax reform.  Legislation is in flux and may have a major effect on some of the strategies outlined above.  Fortunately, you have until year end to make your moves; hopefully the administration will have some semblance of their package in place before then.


For additional guidance on tax planning services, contact your Alloy Silverstein CPA today.


Associate Partner
Rich provides tax, accounting, and auditing services to a broad range of clients, with a specialty in real estate, manufacturing, wholesale, financial services, and other various service industries.
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